Santa Clara, Calif. (June 11, 2003) ? Covad Communications Group, Inc. (OTCBB: COVD), a leading national broadband service provider of high-speed Internet and network access, today announced it is acquiring approximately 23,000 out-of-region business digital subscriber line (DSL) customers from Qwest Communications International Inc. (NYSE: Q).
The customers will be offered similar Covad business-class services specifically, TeleSoho and TeleSpeed. Covad?s small office/home office solution TeleSoho has download speeds of up to 3.0 Mbps. Covad?s TeleSpeed service, with speeds of 144 Kbps to 1.5 Mbps both upstream and downstream, rival those of T1 service at a fraction of the cost.
There will be a 105-day transition period for the Qwest customers. Covad will work with Qwest to ensure that customers continue to receive excellent service and experience minimal disruptions to their service during the transitions. To help customers with the transition, Covad will mail information to each customer within days and will also place calls to answer questions and provide next steps for the transition.
In exchange for the customers, Qwest will receive $3.75 million in cash from Covad, and Covad will release Qwest from an earlier contract that would have required Qwest to buy Covad services with an estimated net present value of $8.8 million. Qwest may receive an additional payment of up to $1.25 million, depending on the success of the migration.
?Qwest is continuing with our strategy to make smart, disciplined decisions to help grow profitable revenue. We believe this agreement with Covad is another step in our execution on that strategy,? said Thomas F. Gillett, senior vice president, Qwest corporate development and business strategy. ?It is also critical to us that customers continue to receive excellent service. We have worked diligently to create a plan to support a successful and comfortable transition so customers will continue to be well-served.?
?A successful transition for these new customers is our number one priority,? said Charles Hoffman, president and chief executive officer of Covad. ?This agreement represents a significant inorganic growth opportunity. We have the ability to add up to 23,000 new business-class customers to our nationwide network at a very reasonable cost of acquisition. We look forward to serving these customers and making sure they get the best broadband experience.?
Most customers are located in California, Delaware, Illinois, Indiana, Kansas, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania Texas, Connecticut, Florida, Georgia, Nevada, North Carolina, Louisiana, Wisconsin, Alabama, New Hampshire, and Rhode Island. Less than 250 customers will be affected in Arizona, Colorado, Minnesota, New Mexico, Oregon, Utah and Washington.
Qwest will continue to offer an array of high-speed broadband services to customers outside its 14-state region including dedicated Internet access, Frame Relay, ATM, private line, and virtual private networks.
About Covad Communications
Covad is a leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, T1, managed security, hosting, IP, dial-up services 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 operates the largest national DSL network with services currently available in 96 of the top Metropolitan Statistical Areas (MSAs). Covad's network currently covers more than 40 million homes and business and reaches approximately 45 percent of all US homes and businesses. Corporate headquarters is located at 3420 Central Expressway, Santa Clara, CA 95051. Telephone: 1-888-GO-COVAD. Web Site: www.covad.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
The statements contained in this press release that are not historical facts are "forward-looking statements," including Covad?s ability to migrate the Qwest customers to its network and the statements made by the president ad chief executive officer of Covad and the assumptions underlying such statements. Actual events or results may differ materially as a result of risks facing Covad or actual results differing from the assumptions underlying such statements. Such risks and assumptions include, but are not limited to, future FCC rulemaking, the terms and interpretations of the decision announced February 20, 2003 by the FCC, Covad's ability to continue as a going concern, to continue to service and support its customers, to successfully market its services to current and new customers, to manage the consolidation of sales to a fewer number of wholesale customers, to successfully migrate end users, Covad's ability to generate customer demand, to achieve acceptable pricing, to respond to competition, to develop and maintain strategic relationships, to manage growth, to receive timely payment from customers, to access regions and negotiate suitable interconnection agreements, all in a timely manner, at reasonable costs and on satisfactory terms and conditions, as well as regulatory, legislative, and judicial developments and the absence of an adverse result in litigation against Covad. Covad disclaims any obligation to update any forward-looking statement contained in this press release. All forward-looking statements are expressly qualified in their entirety by the "Risk Factors" and other cautionary statements included in Covad's SEC Annual Report on Form 10-K for the year ended December 31, 2002 and the Quarterly Report on Form 10-Q for the quarter ending March 31, 2003, along with Current Reports on Form 8-K filed from time to time with the SEC.
This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to: unanticipated delays in completing the process of our restatement of historical financial statements and related audits; the duration and extent of the current economic downturn in our 14-state local service area, including its effect on our customers and suppliers; the effects of our anticipated restatement of historical financial statements including delays in or restrictions on our ability to access the capital markets or other adverse effects to our business and financial position; our substantial indebtedness, and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the SEC's current investigation into our accounting policies, practices and procedures and certain transactions; any adverse outcome of the current investigation by the U.S. Attorney's office in Denver into certain matters relating to us; adverse results of increased review and scrutiny by Congress, regulatory authorities, media and others (including any internal analyses) of financial reporting issues and practices or otherwise; the failure of our chief executive and chief financial officers to provide certain certifications relating to certain public filings; delays in making required public filings with the SEC; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings, including any adverse outcome of current or future legal proceedings related to matters that are the subject of governmental investigations, and, to the extent not covered by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; our future ability to provide interLATA services within our 14-state local service area; potential fluctuations in quarterly results; volatility of our stock price; intense competition in the markets in which we compete, including the likelihood of certain of our competitors emerging from bankruptcy court protection or otherwise reorganizing their capital structure and competing effectively against us; changes in demand for our products and services; dependence on new product development and acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels; higher than anticipated employee levels, capital expenditures and operating expenses; adverse changes in the regulatory or legislative environment affecting our business; and changes in the outcome of future events from the assumed outcome included in our significant accounting policies.
The information contained in this release is a statement of Qwest's present intention, belief or expectation and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and Qwest's assumptions. Qwest may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. The cautionary statements contained or referred to in this release should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This release may include analysts' estimates and other information prepared by third parties for which Qwest assumes no responsibility.
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