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New Edge Networks Nets Nearly $140 Million For Network Growth

New Edge Networks Wednesday finished its third round of financing in 15 months, netting $139.9 million for its digital subscriber line deployment to small, midsize and semi-rural markets in the U.S.

Led by GS Capital Partners III, L.P. and affiliates, the investment arm of Goldman, Sachs & Co., $76.9 million in private equity was raised, while $63 million was raised in debt financing.

The first two rounds of financing netted the company $15.2 million in June 1999 and $62.5 million in January.

Sal Cinquegrani, New Edge Networks spokesperson, said financing began in January and the success of the round is due to the hard work by New Edge Networks employees.

"We received the second round funds in January and immediately started raising capital for the next round," Cinquegrani said. "That's the best time to start, when you don't need it. We're always looking to raise capital.

"I think the success of the third round, especially getting the financing of GS Capital Partners, says a lot about the quality management here at New Edge Networks," Cinquegrani continued. "You really need to have a great business model to get the attention of an investment firm like that."

Rob Gheewalla, of Goldman, Sachs & Co. and newest member of New Edge Network's board of directors, said it was the wholesalers execution that convinced his company to invest.

"Clearly, New Edge Networks has demonstrated an ability to execute," Gheewalla said. "The company is well-positioned to capitalize on broadband opportunities in secondary markets nationwide."

From the beginning, New Edge Networks has caught the attention of investors and peers alike. It's unique business model, which targets smaller markets as opposed to the metropolitan areas favored by competitive and incumbent local exchange carriers alike, has virtually guaranteed its first-to-market status in nearly every city it sets up shop.

And the relative lack of competition by any of the other DSL players has left the wholesale DSL provider in relatively clear waters, while companies like Covad Communications Group, Inc. , Qwest Communications , and Northpoint Communications, Inc. fight each other tooth-and-nail for each new customer.

Currently, New Edge Networks has installed DSL access multiplexers (DSLAM) installed at nearly 600 central offices in 28 states. Of those, almost 400 are operational in 240 cities nationwide. And according to company officials, they can't put them in fast enough.

Dan Moffat, New Edge Networks president, chief executive officer and co-founder, said broadband demand hasn't even reached its peak, and the smaller cities have the highest demand, since other broadband options aren't readily available.

"Broadband is gathering steam and broadband DSL gets better daily," Moffat said. "Broadband will be very successful for one simple reason, people want it. In smaller communities, broadband DSL technology is particularly well-suited because of its broad coverage and in many instances it is the only broadband option for residential and business customers."

According to Cinquegrani, there are no plans to bring the company public, saying that right now, the market conditions are not good for an initial public offering. He also said New Edge Networks has no plans in the near future to expand operations outside the U.S. border.



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