Cbeyond Planning IPO

Cbeyond Communications, a private company delivering communications services to small businesses, has filed a registration statement with the Securities and Exchange Commission to raise up to $172.5 million in an initial public offering.

Founded in 1999, Atlanta-based Cbeyond is seeking to expand beyond five cities amid vigorous growth in the IP-based communications industry.

Cbeyond sells local and long-distance IP phone service, broadband Internet access, Web hosting and other communications services to small businesses in Atlanta, Chicago, Dallas, Denver and Houston. The company anticipates using proceeds from its IPO to fund expansion into six more markets by the end of 2008.

Cbeyond plans to trade on the Nasdaq National Market under the ticker symbol, CBEY.

The planned IPO comes on the heels of a $200 million round of funding the largest Internet phone company, Vonage Holdings Corp., raised to fund expansion in Canada, the United States and the United Kingdom.

Edison, N.J.-based Vonage, which offers Internet phone packages for consumers and small businesses, has about 600,000 lines in service and reports adding 15,000 lines a week. In comparison, Cbeyond was providing communications services to 16,000 customer locations at the end of March. Cbeyond says it is targeting businesses with four to 200 employees.

The company reported 2004 revenue of $113.3 million and an annual net loss of $11.5 million. Battery Ventures, Madison Dearborn Partners and VantagePoint Venture Partners are investors in Cbeyond, which raised $163 million in private equity through the end of last year.

The company predicts 2005 capital expenditures totaling $27.5 million, up from $23.7 million last year. In 2004, Cbeyond purchased $13.5 million of equipment and services from Cisco Systems Inc. through financing from Cisco Capital, its principal lender. Cbeyond had $64.1 million in outstanding debt under its credit facility at the end of March.

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