Covad buys wireless NextWeb

Covad Communications announced this morning that it will acquire fixed wireless Internet provider NextWeb, a California-based company that delivers business broadband services over licensed and unlicensed spectrum, for $24.7 million.

That purchase price includes $4 million in cash, $19 million in Covad stock and the assumption of $1.7 million in debt.

NextWeb’s service can reach about 200,000 business locations in California and Nevada. The company currently has about 3000 customers, based in San Francisco, Orange County, Santa Barbara and Las Vegas.

More importantly, however, the acquisition gives Covad an entry point into wireless access, which becomes another means of reaching business customers, in addition to its DSL lines. Having another means of access will reduce Covad’s dependence on access to copper phone lines owned by incumbent telcos, company officials said, and reduce access costs as well. In addition, Covad will be able to respond more quickly to customer needs by controlling the end-to-end connection and installing wireless systems more quickly.

“Our acquisition of NextWeb accelerates Covad's entry into the emerging wireless broadband market and addresses our key strategic initiative to take control of our destiny,” said Charles Hoffman, Covad president and chief executive officer, in a prepared statement. “NextWeb expands our service area and offers us new, higher-speed broadband services than Covad can currently offer, and provides an alternative to the last-mile copper for delivering data and voice services to business customers.”

Hoffman said Covad expects NextWeb to contribute to Covad’s drive to be EBITDA positive by the middle of 2006, and said the newly combined company will focus on increasing revenue in its existing markets.

The acqusition could also have major impact on the WiMAX market as it adds another company with a national footprint to that market.