CALGARY, Jan. 27, 2014 /CNW/ - Axia NetMedia Corporation (Axia) today provided an update on its strategic growth plan. In 2013, Axia
sold its assets in Singapore and Spain for gross proceeds of $39
million. Axia also secured a three year extension on its contract with
the Government of Alberta and repositioned its business into a lasting
framework. These initiatives allowed us to sharpen our focus on
attractive opportunities in North America and France.
Alberta
In Alberta, Axia brings innovation and competition to the market.
Recently extended a key contractual relationship with the Government of
Alberta through to June 30, 2018 and simplified its historically
complex relationship with Bell into a standard commercial
relationship. Axia is planning two strategic fibre investments to
support the ongoing delivery of high quality fibre services to its
existing customers and position the business for growth.
Strategic Fibre: Axia has begun a project to deploy fibre and related electronics so
that it can offer services to the private sector in all Alberta
communities. This project is scheduled for completion over the next
12-18 months. Axia plans to fund this investment with $20 million of
senior fixed-rate term debt.
Fibre-to-the-Premise (FTTP): Axia has earmarked approximately $10 million of its cash on hand to
be deployed over the next two years to fund, in select locations, the
local fibre connections of a FTTP initiative. This project will
deliver FTTP to underserved markets where targeted levels of market
penetration and financial returns can be met. The related addressable
FTTP market revenue opportunity is $225-$275 million per annum.
By mid-2015, Axia will operate what it believes to be the most
comprehensive, high quality and resilient fibre network interconnecting
communities in the province. The strategic fibre investment coupled
with continuing investments in network electronics and Axia's operating
and business support systems positions the company to address a large
FTTP opportunity across the province. Existing and future customers
will benefit from Axia's ability to deliver the highest quality,
scalable, flexible and attractively priced fibre-based services.
France
Covage continues to generate positive results. Axia, as a 50%
shareholder of Covage, anticipates further growth as it increases
penetration of the French market. Annual interest payments on loans
advanced by its shareholders are being covered by Covage's maturing
cash flow. The first interest payment of $2.8 million was received in
December 2013.
Covage has emerged as the leading independent, pure-play fibre operator
in the French market and Axia plans to capitalize on this position.
Growth within Existing Network Footprint: Over the next three to five years, Axia expects Covage to increase its
market penetration to 15-20%, from approximately 10% currently. Axia
expects a high proportion of incremental revenue to flow through to
EBITDA as its cost base should not increase significantly unless the
business expands by winning new bids. Covage is free cash flow
positive before growth capital investments.
Potential New Wins: Covage is active on several bids for new networks. Given the success
Covage has had to date growing its business and the favourable
operating and regulatory environment in France, Axia has earmarked
$20-$30 million of its cash on hand over the next four years to help
fund potential wins and acquisitions.
Deployment of this cash is contingent upon Covage successfully winning
bids that adhere to its strict financial return criteria. While there
is no certainty with respect to the timing and magnitude of such wins,
Covage's current bid pipeline potentially represents an increase to
Covage's 2013 revenue and EBITDA of 100%-200% over the next five to ten
years. This takes into account the time to build and commission the new
networks and grow market penetration to reasonable levels.
Cash Return Strategy
On January 6, 2014, Axia declared an initial quarterly dividend of
$0.0125 per share. This decision reflects Axia's confidence in its
ability to generate ongoing cash flow, its prospects for growth and a
desire to broaden its pool of potential shareholders. In addition, on
December 12, 2013, Axia renewed its Normal Course Issuer Bid.
About Axia
Axia owns, operates and sells services over fibre optic communications
infrastructure located in Alberta, France and Massachusetts. Axia
trades on the Toronto Stock Exchange under the symbol "AXX".
Additional information will be posted on Axia's website at www.axia.com.
This News Release contains forward-looking statements, including,
without limitation, statements containing the words "should",
"believe", "anticipate", "may", "plan", "will", "continue", "intend",
"expect", "estimate" and other similar expressions which constitute
"forward-looking information" within the meaning of applicable Canadian
securities laws. These statements are based on our current
expectations, estimates, forecasts and assumptions about the operating
environment, economies and markets in which we operate and are subject
to important assumptions, risks and uncertainties that are difficult to
predict. Examples of these statements would include those where Axia
forecasts its success and timing in winning new NGN business, the
timing and amount of future dividend payments, the timing of completion
and estimated total costs of our networks, the revenues and operating
costs associated with these networks over time, and Axia's ability to
generate future cash flows and avail itself of other financing
alternatives given current market conditions. The assumptions, risks
and uncertainties that could cause actual results to differ materially
from the forward-looking information, include, but are not limited to,
changes in customer markets, changes in demand for our services, our
inability to deliver services in a timely and cost efficient manner,
technological change, general economic conditions and other risks
detailed from time to time in our ongoing filings with the Canadian
securities regulatory authorities, including those in our Annual
Information Form, which filings can be found at www.sedar.com. Given
these assumptions, risks and uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements. Unless
otherwise required by applicable securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements
either as a result of new information, future events or otherwise.
SOURCE Axia NetMedia Corporation
