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Covad Acquires InternetConnect Assets

Once upon a time, Covad Communications was on the brink of extinction. Now it is sopping up the assets of other companies.

The latest sign of Covad's comeback is the acquisition of the assets of InternetConnect, a Torrance, Calif.-based Internet Service Provider (ISP), which has been in bankruptcy since May 2001 for $7.35 million.

The Santa Clara, Calif.-based data competitive local exchange carrier (DLEC), which emerged from Chapter 11 Bankruptcy last month, purchased InternetConnect's assets during a bankruptcy auction. Covad did not assume any liabilities or obligations of InternetConnect but will fund any shortfall in operating revenue during the transition period.

Assets include accounts receivable, cash, equipment and other assets and approximately 9,250 lines, which include DSL and T1 broadband connections, along with virtual private network (VPN) customers. The majority of these lines are currently on Covad's network. There will be a 90-day transition period for all assets to come under Covad's control. The company says end users on the InternetConnect lines will be offered similar Covad services and should experience minimal service disruption.

Covad expects that customers will be able to maintain their e-mail address and other services offered by InternetConnect during the transition period and beyond. Communications to customers telling them about the easy integration process will be sent by mid-January.

Approximately 60 percent of Internet Connect customers are in the Los Angeles, San Diego, San Francisco, Chicago, Boston and Washington, D.C. areas.

"Our number one priority is that these customers now have the assurance of high quality service continuity from a company that is here for the long run," says Covad executive vice president of Marketing and Strategy Chuck Haas. "It is also good for Covad as we are able not only to preserve these customers and get InternetConnect off our distressed ISP list, but these lines will now be higher revenue and profit for us as direct customers. It is a win-win situation all around."

Covad has seen a tremendous turnaround. After its reorganization plan was rejected by some investors, SBC Communications agreed to pay Covad $135 million to save the company and erase some $15 million in advertising fees.

The company also recently signed Speakeasy and DSL.net, two of the nation's leading providers of business-class broadband access and network services, to sell its TeleXtend services.