Covad Completes NextWeb Acquisition

A couple of months later than initially projected, Covad Communications Group Inc. has completed its acquisition of NextWeb Inc., a provider of fixed wireless Internet services for business that operates in California and Nevada.

Covad will pay approximately $3.9 million in cash and issue approximately 16 million Covad shares in the transaction, for a total of approximately $24.7 million. Some of the Covad shares to be issued are restricted from sale in the open market for a period of time.

Both companies offer VoIP services for business. Covad acquired IP Centrex provider GoBeam more than a year ago to provide hosted PBX services to customers. NextWeb resells the hosted PBX service of CommPartners Inc., a wholesale business VoIP provider based in Las Vegas. The acquisition gives Covad an alternate broadband route to customers in addition to the T1 and SDSL connections it uses, most obtained from incumbent carriers.

“For the last five years, no one has delivered business-class wireless broadband better than NextWeb, said Charles Hoffman, Covad president and CEO. 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, Calif., provides broadband service to SMBs at speeds up to 100mbps. It serves 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, with coverage available to more than 200,000 business locations in these areas.

Covad said it will focus on maximizing NextWebs revenue and profit contribution within its existing wireless markets and footprint throughout 2006, contributing to Covads plan to be EBITDA positive by the middle of the year.

Graham Barnes, NextWebs CEO, will become senior vice president and general manager, and will report to Hoffman. NextWeb will continue to offer all of its broadband services.

NextWeb proved that carriers could efficiently and profitably deliver business-class broadband services using pre-WiMAX technology, said Barnes. 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.

Covad Communications Group Inc.
NextWeb Inc.

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