Covad Makes European Broadband Investment
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Loop is a full-service broadband provider serving small and medium sized businesses. It has its own backbone network in Spain and expects to be a major player in the DSL market when the local loop unbundled next year.
Covad is paying US $50 million for Loop Holdings Europe AsP, which in turn owns 70 percent of Loop Telecom, S.A. The payments are to be split into a US $15 million initial payment, followed by another US $15 million in 6 months and the remaining US $20 million after one year.
Robert Davenport, chief executive of Covad Communications International B.V., said the investment in Loop Telecom was the first stage of Covad's European entry strategy.
Covad, which now gets three seats on the Loop Telecom board, plans to enhance the Loop management team and improve service delivery processes by bringing its own operating technology.
Loop uses a direct sales model and supplies businesses with a variety of data services, including broadband DSL for high-speed Internet access, virtual private networks, local area networks and services such as Web hosting, e-mail and e-commerce.
Currently, Loop has offices in Madrid, Bilbao, Valencia and Seville in addition to its headquarters in Barcelona. It has plans to extend its network to the whole Iberian Peninsula.
With the Spanish data market currently growing at 25 percent per year, one of the highest growth rates in Europe, prospects for Covad's first European venture appear good. Meanwhile, in the U.S., it expects its network to reach 45 percent of all homes and 50 percent of all businesses by the end of the year.