Axia NetMedia 2008 Progress Report

20
Growing Axia progress report 2008

description

2008 progress report for Axia NetMedia Corporation (TSX: AXX)

Transcript of Axia NetMedia 2008 Progress Report

Page 1: Axia NetMedia 2008 Progress Report

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Growing

Axia

pro

gre

ss r

eport

20

08

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Axia NetMedia Corporation

All around the world high performancedigital networks are being recognizedas critical infrastructure to compete inthe modern global economy.Progressive regions are and will beinvesting in these networks.

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Axia offers unlimited access to the global gateway through an uncompromised,Real BroadbandTM network model. A model that is truly open, without conflict and that offers limitless possibilities for growth.

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Axia NetMedia Corporation

growing our French business

2

We are active in France through Covage, a French company jointly owned by Axia Networks France, a wholly owned subsidiary of Axia, and our French partner, VINCI Networks, a wholly owned subsidiary of VINCI Construction France. Covage is involved in the acquisition, development, operation and ownership of no conflict Open Access Next Generation (“OAN NextGen”) networks in France. It currently has 12 networks — nine networks of which are active or in the early stages of activation and three are in the construction phase. In fiscal 2008 we embarked on a national fibre backbone connectivity project that will utilize 1,800 kilometres of existing dark fibre infrastructure creating a ringed network from Arras in northern France to Montpellier in the south of France. On completion in mid-calendar 2009, this project will connect Covage’s existing networks to each other and to the main interconnect points in Paris. This national infrastructure project will improve Covage’s service offering to its current and prospective customers by enabling customers to connect directly to Paris, the global gateway for France, and enhance Covage’s competitive position with respect to new net-work prospects. We believe that the development and operation of IP-based networks in France represents a significant growth opportunity, which will unfold over the next several years.

ArrasNetworks

Moselle TelecomParticipation

SEM@FOR77(Seine-et-Marne)

Caen.com

Grand ChalonNetworks

ClermontCommunautéNetworks

CreusotMontceauNetworks

GrandAngoulêmeNetworks

3CNET(Cosnesur Loire)

Hérault Participation

GaronneNetworks

Coval Networks (Sicoval)

Early stage active networks

Construction phase

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France

4.56 million people

1,791 communities

31,000 businessesThe

Chem

inée

de

More

tti à

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se is

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ell-

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ense

are

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Par

is.

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ated

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ch p

ainte

r Ray

mond M

ore

tti, t

he

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is a

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ent,

cla

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lass

fibre

tubes

.

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Axia NetMedia Corporation

Our business in France continues to evolve and Covage is creating competition, which supports local access operators and Retail Service Providers (RSPs) as they deliver their IP services to business and retail custom-ers. Covage is targeting different types of RSPs: (i) small local RSPs offering services on only one network; (ii) regional and national RSPs offering services on several of Covage’s networks; and (iii) large international RSPs who target medium and large customers.

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10 40

bandwidth Gbps

RSPs

7.5 30

5 20

2.5 10

0 0

10

6.2

4,000 out of 31,0002007

200815,000 out of 31,000

addressable market

10

26

The

table

to

the

side

dep

icts

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age’

s gro

wth

in b

andw

idth

as

wel

l as

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num

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of RSP

cust

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s. I

n

term

s of

Cov

age’

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s m

etrics

, w

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arke

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king B

road

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une

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2008,

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. W

ith 1

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ould

ear

n a

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urn

bef

ore

tax

on o

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capital

inve

stm

ent.

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Axia NetMedia Corporation

Alberta429 communities

2,073 learning facilities

309 library facilities

400 health facilities

1,300 government facilities

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The Government of Alberta (GoA) had a vision to make global connectivity available to all Albertans whether they lived in rural or urban areas. Thanks to Axia’s innovative solution, the GoA has a state-of-the-art IP network that connects 429 communities and provides direct connectivity to over 4,200 government, learn-ing, health, library and municipal locations. The Alberta SuperNet uses Axia’s OAN NextGen model which has created a competitive environment for RSPs who want to deliver ultra-high-speed services, including Internet access, to their retail and business customers even in rural areas. In fiscal 2008, we placed substantial focus on connecting new customers to the Alberta SuperNet and increasing bandwidth commitments from existing customers. As a result, we are experiencing growth in bandwidth usage in the government and RSP sectors.

critical infrastructure for a progressive province

Fibre Network

Wireless

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Axia NetMedia Corporation

This

tab

le h

ighlig

hts

our

pro

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ss a

s w

e co

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t m

ore

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om

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to t

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Alb

erta

Super

Net

and g

row

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dw

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m e

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ust

om

ers.

60 14

bandwidthGbps

non-governmentbandwidthGbps

55 13

50 12

45 11

40 10

11.7

50

70 260

RSPs with activeconnections

# of communitieswith RSPs

65 250

60 240

55 220

50 200

67

22559

2007

2008

254

13.2

58

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Using the Alberta SuperNet as their backbone, RSPs are penetrating the Alberta resource and enterprise sector. RSPs are an important component of the Alberta SuperNet’s future growth and we are working closely with them to grow their bandwidth requirements.

60 14

bandwidthGbps

non-governmentbandwidthGbps

55 13

50 12

45 11

40 10

11.7

50

70 260

RSPs with activeconnections

# of communitieswith RSPs

65 250

60 240

55 220

50 200

67

22559

2007

2008

254

13.2

58

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Axia NetMedia Corporation

future

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Real Broadband™ is recognized as critical infrastructure for staying competitive in the 21st century digital economy. Axia’s no conflict OAN NextGen model is gaining worldwide recognition. As a result of our success in Alberta and France, we are pursuing potential OAN NextGen opportunities of varying stages in other jurisdictions around the world. Currently these opportunities consist of bid and proposal responses in Singapore and Australia. We also continue to have preliminary discussions in the Middle East and North America.

We are pursuing opportunities on a similar or larger scale than the Alberta SuperNet.

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Axia NetMedia Corporation

Dear Fellow Shareholders:

The evolution of the telecom sector is driven by the ever-growing consumer demand for web services that

depend on global digital IP connectivity. It is clear that, from cost, connectivity and performance perspec-

tives, region-wide fibre grids combined with wireless technologies for local connectivity create a future-proof

technical and commercial approach. End users do not want the challenge of integrating technology to make

it work; they want easy to use, high-performing, low-cost services targeted at their needs. The new success

stories in the Internet sector have a growing dependence on no-compromise ubiquitous connectivity between

service providers and end users. End users and new web service providers like Google and Facebook are

influencing public policy. Separating the transport/connectivity role from the web services role is now topical

in progressive jurisdictions.

Axia’s business is strategically aligned with the above fundamentals. We use a no-conflict open access

approach to the transport/connectivity segment. This enables the role of fibre optic technology to be optimized

while complementing the role of wireless technology. It also enables the web services sector to offer services

to end users without having to compete with the transport/connectivity sector. These two sectors – the trans-

port/connectivity sector and the web services sector – depend on different core competencies and focus and

are naturally complementary if one thinks of the end user first. This approach also allows the appropriate

regulatory oversight on the transport/connectivity services while allowing competition and the entrepreneurial

evolution of web services based on the choice of the end users.

Axia has proved that applying these principles in the rural/remote sector is working through the Alberta

SuperNet. Axia is on plan for demonstrating that our approach is successful in medium density regions through

Covage’s operations in France. We are confident that the same fundamentals, which we have incorporated into

our Singapore proposal, are the key to successful Next Generation Network implementations in metropolitan

centres.

The Alberta SuperNet

The Alberta SuperNet is an excellent reference point on how Axia’s OAN NextGen network model can bridge

the Digital Divide between rural and urban communities. Operationally this year, we placed substantial focus

on connecting new customers to the Alberta SuperNet and increasing bandwidth commitments from existing

customers which resulted in increased bandwidth usage by the government and RSP sectors.

letter to shareholders

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We launched a Gigabit Ethernet Service for our government customers who require large amounts of band-

width and a Critical Infrastructure Service for customers who need a SuperNet connection with 99.999% ac-

cess and network availability.

In the RSP and enterprise sector, we launched Axia Broadband Connection Services to facilitate connec-

tions to the Alberta SuperNet and we are working closely with them to grow their bandwidth requirements.

New regional and national RSPs were recruited in 2008 and we anticipate that this will significantly enhance

the growth potential of the Alberta SuperNet.

France – Covage

In France, our OAN NextGen model provides transport/connectivity services through regional networks.

Nine networks are active or in the early stages of activation. We expect to activate Grand Angoulême and

SEM@FOR77 in the fall of 2008 and Hérault Participation in the summer of 2009. Our results from Covage

increased dramatically since fiscal 2007 which reflect both the increase in the number of networks reporting

revenue as we have now transferred the majority of our network interests into Covage and from bandwidth

sales to our RSPs. In fiscal 2008 we increased the number of Covage’s RSP customers from 10 to 26 and grew

our bandwidth to 10 Gbps from 6.2 Gbps at the end of fiscal 2007.

We continued to strengthen our France business with Covage’s national fibre backbone connectivity

project. The project will be completed by mid-calendar 2009 and utilize 1,800 kilometres of existing dark fibre

infrastructure to create a ringed network from Arras in northern France to Montpellier in the south of France.

We believe that the national network will create an attractive value proposition for national operators and large

corporate and government customers.

Currently, Covage has four additional OAN NextGen bids outstanding with decisions expected by the

end of calendar 2008. Covage continues to review new opportunities in light of the capital markets and the

slowdown in the French economy. Potential opportunities are selected if they complement Covage’s existing

operations, the national backbone from a geographical perspective and their economic potential given the

investment climate.

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Axia NetMedia Corporation

International Business Development

As a result of our success in Alberta and France, we are pursuing potential OAN NextGen opportunities in

other jurisdictions around the world. Currently these opportunities consist of bid and proposal responses

in Singapore and Australia. We also continue to have preliminary discussions in the Middle East and

North America.

Axia is the lead member of the OpenNet consortium with a 30% interest. Our partners are Singapore Tele-

communications Limited (30%), Singapore Press Holdings (25%) and SP Telecommunications Pte Ltd (15%).

OpenNet has submitted a response to the Infocomm Development Authority (“IDA”) of Singapore’s RFP for the

rights to construct and provision passive fibre grid services throughout Singapore. This is the first part of the

IDA’s competitive bid process for a complete Next Generation National Broadband Network. We are qualified

to respond to the second RFP for the provision of active broadband services over the fibre grid with submis-

sions due before the end of this calendar year.

In April 2008, the Government of Australia issued a Request for Proposal to roll out and operate a national

network. We have qualified to respond to an RFP for Next Generation Network implementation(s) in Australia.

Submissions are now expected to be delivered in late calendar 2008.

Axia’s people

One of the highlights this year was Axia being named Canada’s Best Small and Medium Employer in a nation-

wide study. At Axia, we believe that to be a successful, high-performing company we must excel when judged

from the perspective of our customers, shareholders and employees. Our team approach and our employees’

sharing of intellectual capital and knowledge are crucial to the success of our business.

We continually strive to create collaborative high-performing teams composed of individuals with comple-

mentary knowledge and skills. Axia has business unit teams in Alberta and France that are supported by a tight

corporate group. We believe that this approach reinforces our customer focus and recognizes each market’s

local character. Each time Axia is successful in securing an OAN NextGen opportunity in a new market, we will

add another dedicated business unit team while maintaining the same organizational approach.

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Outlook

Next Generation Network opportunities typically involve deploying substantial capital in return for long-term

reliable profits. The opportunities available to Axia are growing at a time when traditional debt and equity capital

markets are, to say the least, unreliable. Axia’s Management and Board assess the attractiveness of each new

opportunity taking into account the value of momentum and market position and Axia’s role with respect to

deploying capital. At the same time, Axia’s Management and Board remains vigilant in considering the potential

dilution shareholders may face as a consequence of Axia choosing to raise capital in the current environment.

Axia plans to maintain its strong balance sheet approach. Management and the Board will consider all these

factors as the Corporation seeks the path that it believes will maximize shareholder value.

On behalf of the Board of Directors, I would like to take this opportunity to thank our customers who

continue to experience the value in our solutions, our dedicated employee team for their contributions and our

shareholders for their support.

Art Price, Chairman and CEO

September 18, 2008

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Axia NetMedia Corporation

Axia provides Real Broadband™ IP services and solutions throughplanning, designing and operatingno conflict Open Access NextGeneration Networks. We lead by example having created theAlberta SuperNet, which we believe is the world’s best regional IP broadband network. We are now exporting our solution to France and other regions around the world.

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corporate directors

Art Price (Chairman)

Charles W. Brown

C. Kent Jespersen

Robert L. Phillips

John Read

William Smith, QC (Corporate Secretary)

executive team

Art Price – Chief Executive Officer

Peter L. McKeown – Chief Financial Officer

Mark Blake – Vice-President, Global Business

Development and Marketing

Corinne Hua – Vice-President, Finance and Controller

Jim Lindberg – Vice-President, Alberta Operations

Drew McNaughton – Chief Technology Officer

Dave Mullins – Vice-President, Alberta Sales

Jean-Michel Soulier – President, Axia Networks France

Nicole Springer – Vice-President and General Counsel

Dawn Tinling – Vice-President, Investor Relations

and Communications

transfer agent

Computershare Trust Company of Canada

Calgary, Alberta

bankers

HSBC Bank Canada

Calgary, Alberta

lawyers

McCarthy Tétrault LLP

Calgary, Alberta

auditors

KPMG LLP

Calgary, Alberta

stock exchange listing

Toronto Stock Exchange “AXX”

head office

Axia NetMedia Corporation

3300 450 1st Street SW, Calgary, AB T2P 5H1

T 403.538.4000

F 403.538.4100

For more information: [email protected]

www.axia.com

annual meeting

Thursday, November 13, 2008

3:00 p.m. (Mountain)

Calgary Chamber of Commerce

100 6th Avenue SW,

Calgary, Alberta

design and production by Equicom, a TMX Company.

corporate information

Axia’s Management’s Discussion & Analysis, AuditedConsolidated Financial Statements and Notes for theyear ended June 30, 2008 have been reviewed andapproved by the Corporation’s Audit Committee andBoard of Directors. These reports were filed on SEDARand posted to www.axia.com on September 22, 2008.

Page 20: Axia NetMedia 2008 Progress Report

Axia NetMedia Corporation

3300 450 1st Street SW, Calgary, AB T2P 5H1

T 403.538.4000

F 403.538.4100

For more information: [email protected]

www.axia.com