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.
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.
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.
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
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Chief Financial Officer
Axia NetMedia Corporation
Axia NetMedia Corporation