Rhythms' ISP Customers Become Financially Stronger
ENGLEWOOD, Colo., Dec 22, 2000 /PRNewswire via COMTEX/ -- Rhythms NetConnections
Inc. (Nasdaq: RTHM), an international provider of broadband communication
services, announced today that its Internet service provider (ISP) customers are
becoming financially stronger.
As of September 30, 2000, the majority of Rhythms' consumer lines were
distributed through two ISP partners. On December 21, 2000, Telocity, Inc., one
of those ISP partners announced plans to be acquired by HUGHES Electronics
Group, which should eliminate any concerns regarding Telocity's future funding.
Telocity is current in its receivables with Rhythms. As previously announced,
Flashcom, Inc., another ISP partner, signed an agreement with Rhythms to
transition approximately 7,000 of its customers currently receiving Rhythms' DSL
service to Rhythms' network.
"Rhythms believes its channel approach is broader, and more diverse than that of
our competitors, consisting of Fortune 500 companies, small and medium
businesses, telecommunications carriers, broadband integrators and national and
regional ISPs," said Steve Stringer, President and COO of Rhythms. "We believe
HUGHES' pending acquisition of Telocity should eliminate future funding concerns
associated with Telocity."
Rhythms reported total net revenue for the third quarter ended September 30,
2000, of $17.2 million. Approximately 11% of the total was consumer revenue from
ISP customers and 89% was business revenue.
Rhythms reported an installed DSL subscriber base of 47,000 lines as of
September 30, 2000. Of Rhythms' 47,000 DSL lines approximately 35 percent of
which were consumer lines and 65 percent were business lines.
Funding Update
As of September 30, 2000, Rhythms had $748 million in cash, investments and
restricted cash. While Rhythms is actively exploring additional funding, its
current cash position, along with recent vendor equipment financing, is expected
to fund Rhythms' operational needs through the end of 2001.
"Rhythms has built a valuable asset in its North American DSL network. It has
taken more than three years to build a carrier-class network, develop the
operational systems to support our business and continue to grow our subscriber
base," said Stringer. "We are optimistic about the future of broadband and the
important role DSL will play."
About Rhythms
Rhythms NetConnections Inc. (Nasdaq: RTHM) provides DSL-based, broadband
communication services to businesses and consumers. Based in Englewood, Colo.,
Rhythms currently serves 60 markets, covering 97 MSAs. Telecommunications
services for Rhythms are provided by Rhythms Links Inc., a wholly owned
subsidiary of Rhythms. For more information, call 1-800-RHYTHMS
(1-800-749-8467), or visit the company's Web site at www.rhythms.com.
The statements contained in these materials which are not historical facts may
be deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties. In accordance with the
Private Securities Litigation Reform Act of 1995, the following are important
factors that could cause Rhythms' actual results to differ materially from those
expressed or implied by such forward looking statements. There can be no
assurance that Rhythms will be able to maintain or accelerate its growth rate
given the highly competitive nature of its market, its short operating history,
the unproven nature of its business model and the fact that the DSL market
itself is still relatively new and evolving. The DSL market is highly
competitive, with several large established industry competitors who have
significantly greater financial resources than Rhythms, and the
telecommunications industry in general is undergoing rapid technological change.
Rhythms expects its losses to continue and such losses may fluctuate
significantly from period to period due to the amount and timing of expenditures
related to the expansion of its services and infrastructure and the rate of
customer acquisition and turnover. The sales cycle for new customers and the
development cycle for new products and applications can be lengthy. Rhythms'
agreements with its customers generally do not assure that Rhythms will generate
a certain amount of revenue, do not designate Rhythms as its exclusive provider
and are terminable by the clients on relatively short notice. Several of
Rhythms' customers are young, emerging companies that are not fully funded and
have ongoing financing requirements. Rhythms' services may not achieve
significant market acceptance because its prices are often higher than those
charged for competing services. Rhythms' dependence on incumbent carriers for
collocation and transmission facilities and its inability to control the terms
and conditions under which Rhythms can gain access to incumbent carrier
collocation and transmission facilities may cause shortfalls in its business
objectives. Rhythms will continue to encounter government regulation that may
restrict its timing or extent of market deployment and ultimate financial
success. Rhythms' substantial debt and preferred stock obligations create
financial and operating risks and there can be no assurance that it can satisfy
its debt and/or preferred stock obligations, covenants or be able to obtain
adequate financing to fund future initiatives. Current market conditions are not
favorable to obtaining additional financing. The reliance on third parties for
certain sales and marketing activities, for equipment installation and for fiber
optic transport facilities creates significant risk of non-performance and may
adversely affect Rhythms' financial results. The success of Rhythms' business
and its ability to execute its business plan are both reliant, in part, on its
ability to retain and attract key personnel. Rhythms' principal stockholders and
management own a significant percentage of Rhythms and may have the ability to
exercise significant influence over Rhythms. Readers are encouraged to review
Rhythms' recent filings with the Securities and Exchange Commission, including
"Risk Factors" contained in these documents. Descriptions of risk factors are
not intended to be complete. Rhythms undertakes no obligations to review or
confirm analysts' expectations or estimates or to release publicly any revisions
to any forward-looking statements after the date hereof or to reflect the
occurrence of unanticipated events.
SOURCE Rhythms NetConnections Inc.
CONTACT: Karen Breen, Investor Relations, 303-876-2611,
kbreen@rhythms.net, or Chris Hardman, Public Relations, 303-476-4259,
chardman@rhythms.net, both of Rhythms NetConnections Inc.
URL: rhythms.com
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