Covad Signs Agreement to Acquire NextWeb to Accelerate Entry Into Wireless Broadband
biz.yahoo.com
Wednesday October 5, 6:00 am ET
Acquisition Will Help Reduce Cost of Access and Enhance Product Portfolio in Several Important Covad Markets
SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 5, 2005--Covad Communications Group, Inc. (AMEX:DVW), a leading national provider of integrated voice and data communications, today announced it has signed an agreement to acquire NextWeb, Inc., a leading fixed-wireless Internet provider for business.
NextWeb, based in Fremont, California, utilizes licensed and unlicensed wireless technology to deliver cost-effective, business-class broadband service to small and medium business at speeds up to 100 megabits per second (Mbps). Covad will acquire NextWeb in a transaction valued at approximately $24.7 million that is expected to close by the end of the year, subject to customary closing conditions, including the approval of NextWeb's stockholders. NextWeb stockholders will receive $4 million in cash, $19 million in Covad shares in exchange for their NextWeb shares and the assumption of $1.7 million in net debt. A portion of Covad shares to be issued are restricted from sale in the open market for a period of time. The stock component of the deal is subject to a collar arrangement.
NextWeb currently provides service to nearly 3,000 business customers in the San Francisco Bay Area, Los Angeles, Orange County (CA), Santa Barbara and Las Vegas. NextWeb's service is available to more than 200,000 business locations in more than 175 cities throughout California and Nevada.
With wireless, Covad can:
Reduce its direct recurring costs per customer for an equivalent wireline T1 by up to 60 percent
Deliver an improved customer experience as a result of being able to control the service end-to-end and install it faster
Reduce dependence on copper and the regulatory landscape
Add new, high-bandwidth services targeted at the small- and medium-sized business market
"Our acquisition of NextWeb accelerates Covad's entry into the emerging wireless broadband market and addresses our key strategic initiative to take control of our destiny," said Charles Hoffman, Covad president and chief executive officer. "NextWeb expands our service area and offers us new, higher-speed broadband services than Covad can currently offer, and provides an alternative to the last-mile copper for delivering data and voice services to business customers.
"Wireless broadband is a perfect complement, not a replacement, to our nationwide DSL network and certainly helps enhance shareholder value. With this acquisition, Covad fulfills the meaning of its stock symbol, DVW, which stands for Data, Voice and Wireless," Hoffman added. "Our focus for 2006 will be on maximizing the revenue and profit contribution within NextWeb's existing markets and footprint. This will contribute to our commitment for Covad to be EBITDA positive by mid-year 2006."
Graham Barnes, NextWeb chief executive officer, said: "NextWeb has been a leading fixed-wireless player delivering highly reliable business-class Internet service using pre-WiMAX technology. Our profitable growth has come through a combination of operational excellence and strategic vision. Now, by combining with Covad, we are able to truly take our business, and the fixed-wireless broadband industry, to the next level."
NextWeb offers a full range of business broadband services, including scalable bandwidth from 384 Kbps to 10 Mbps, and higher, redundant access solutions, high-capacity licensed point-to-point links at speeds up to 100 Mbps and an array of managed solutions. Key business highlights include:
Triple-digit revenue growth over the last four years finishing 2004 with revenues of approximately $8 million
EBITDA and cash-flow positive since December 2003
Loyal customer base, with 1.7% average monthly churn
Graham Barnes will continue to run NextWeb's wireless operations in the position of senior vice president and general manager.
Andrew Kreig, President of the Wireless Communications Association (WCA), the trade organization of the broadband wireless industry, said: "NextWeb has assumed a clear leadership position in the broadband wireless industry and has been an important player in WCA's pursuit of innovative, pro-competitive wireless policies. Covad's acquisition of NextWeb holds great promise for the industry." |
