Covad Finalizes Acquisition of NextWeb; Purchase Brings Covad 3,000 Profitable Broadband Wireless Customers in California and Nevada

February 21, 2006; 07:05 AM
Covad Communications Group, Inc. (AMEX:DVW), a leading national provider of integrated voice and data communications, has completed its acquisition of NextWeb, Inc., a broadband wireless carrier operating in California and Nevada.

"For the last five years, no one has delivered business-class wireless broadband better than NextWeb," said Charles Hoffman, Covad president and chief executive officer. "With this acquisition, we complement our existing network footprint, can provide higher bandwidth products to our customers, can provision customers more quickly, and ultimately own the 'last mile' and further reduce our dependency on the ILECs."

NextWeb, based in Fremont, California, delivers business-class broadband service to small and medium-sized businesses at speeds up to 100 megabits per second (Mbps), complementing Covad's existing portfolio of data solutions. NextWeb currently provides service to more than 3,000 business customers in the greater San Francisco Bay Area, the Los Angeles metropolitan area, parts of central California, and Las Vegas, NV, with coverage available to more than 200,000 business locations in these areas.

NextWeb finished 2005 with revenues of approximately $10 million and has been EBITDA and cash-flow positive since December 2003. Covad's focus for 2006 will be maximizing NextWeb's revenue and profit contribution within its existing wireless markets and footprint. This will contribute to Covad's plan to be EBITDA positive by mid-year 2006.

Graham Barnes, NextWeb's CEO, will report to Hoffman in the position of senior vice president and general manager. NextWeb will continue to offer its full portfolio of business broadband services, including scalable bandwidth up to 10 Mbps, redundant access, converged solutions, and high-capacity licensed point-to-point links at speeds up to 100 Mbps.

According to Barnes, "NextWeb proved that carriers could efficiently and profitably deliver business-class broadband services using pre-WiMAX technology. By becoming part of Covad, we are now well-positioned to capitalize on the potential that wireless broadband access technology has as a complement to traditional wireline broadband services."

"The combination of wireline and wireless broadband services is a competitive advantage as business customers continue to seek out providers of converged voice and data solutions offered through a variety of technologies," says Pyramid Research's senior analyst Ozgur Aytar.

Covad will pay approximately $3.9 million in cash and issue approximately 16 million Covad shares in the transaction. A portion of Covad shares to be issued are restricted from sale in the open market for a period of time.

About Covad

Covad is a leading nationwide provider of integrated voice and data communications. The company offers DSL, Voice Over IP, T1, Web hosting, managed security, IP and dial-up, wireless broadband, and bundled voice and data services directly through Covad's network and through Internet Service Providers, value-added resellers, telecommunications carriers and affinity groups to small and medium-sized businesses and home users. Covad broadband services are currently available across the nation in 44 states and 235 Metropolitan Statistical Areas (MSAs) and can be purchased by more than 57 million homes and businesses, which represent over 50 percent of all US homes and businesses. Corporate headquarters is located at 110 Rio Robles, San Jose, CA 95134. Telephone: 1-888-GO-COVAD. Web Site: www.covad.com.