OCTOBER 11, 2007 -- XFONE Inc. today announced that NTS Communications Inc. has recently been approved by the United States Department of Agriculture to receive $11.8 million in Rural Utilities Service (search for RUS) broadband loan funding for the purchase and installation of the network, central office, and customer premise equipment that will make up NTS' fiber-to-the-premises (search for FTTP) optical network, to be constructed in the Levelland and Smyer, TX, markets. The term of the loan is 17 years, with interest only to be paid in the first year. The interest rate is based upon the prevailing average rate of marketable treasury obligations.
XFONE recently signed a definitive agreement to acquire NTS.
NTS will offer voice, video, and data options via its FTTP network to an estimated 6,000 customers. The RUS loan will fund an aggressive network build out, scheduled to begin in the later part of 2007 with the first customers expected to be added in the second quarter of 2008. Based on a market survey conducted in accordance with RUS guidelines, NTS projects a market penetration of nearly 70%. Market analysis indicates that 69% of the target market customers now have Internet service, and 82% of these potential customers have transmission speeds below 1 Mbit/sec, says the company. The NTS residential data package will include an 8-Mbit/sec downstream/1-Mbit/sec upstream transmission rate, which will be offered with both voice and video services.
NTS says it will leverage the technology, expertise, and experience it has gained through its successful FTTP offering in Lubbock, TX.
"The RUS funds provide NTS with a very low cost of capital to finance the next phase of FTTP roll-out in Western Texas," notes Guy Nissenson, CEO of XFONE. "The company's successful introduction of this service in Lubbock, TX, has demonstrated a very high adoption rate by homes passed, high gross margins, and high customer retention rates. FTTP is a state-of-the-art offering, and we expect a rapid return on the investment in this project," he reports.
RUS broadband loans are granted as part of the USDA's Rural Development Telecommunications Program, which provides financing for the development of telecommunications infrastructure in rural America through partnerships with rural cooperatives, nonprofit associations, public bodies, and for-profit utilities. Specifically, The Broadband Access Loan Program provides loans for funding the costs of construction, improvement, and acquisition of facilities to provide broadband service to eligible rural communities.
On August 23, 2007, XFONE announced that it had signed a definitive agreement to acquire NTS, provider of integrated voice, data, and video services, headquartered in Lubbock, TX. XFONE expects the acquisition to expand its service area and create a diversified communications services company with combined annualized revenues and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) exceeding $114 million and $14 million, respectively based upon the first six months of 2007 unaudited results. Completion of the acquisition is subject to certain conditions, including obtaining financing and the receipt of regulatory approvals where relevant.
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