DSL provider Covad Communications Group Inc. announced it purchased pre-WiMAX carrier Next-Web Inc. for $24.7 million in cash and stock. NextWeb offers wireless broadband services to 3,000 business customers in the San Francisco Bay Area; Los Angeles; Orange County and Santa Barbara, Calif.; and Las Vegas.
NextWeb is cash-flow positive with 2004 revenues of $8 million.
“Wireless broadband is a perfect complement, not a replacement, to our nationwide DSL network and certainly helps enhance shareholder value,” said Charles Hoffman, Covad’s president and chief executive officer. “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.”
Covad sells broadband voice and data communications to small and medium businesses. The company owns and operates a nationwide facilities-based DSL broadband network covering more than 50 percent of homes and businesses. The company already has dipped its toe in the wireless broadband market with a trial in San Francisco using pre-WiMAX equipment.
Covad said its NextWeb acquisition would help reduce its direct recurring costs per customer for an equivalent wireline T1 line by up to 60 percent and would reduce its dependence on copper and the regulatory landscape.
“NextWeb has been a leading fixed-wireless player delivering highly reliable business-class Internet service using pre-WiMAX technology,” said Graham Barnes, NextWeb’s CEO. “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 sells wireless connections from 384 kilobits per second to 10 megabits per second, as well as high-capacity licensed point-to-point links at speeds up to 100 Mbps. The carrier said it has registered triple-digit revenue growth during the past four years and that its earnings before interest, taxes, depreciation and amortization and cash flow have been positive since December 2003.
