SBC Spends $5 Million, Picks Up $1.3 Billion

SBC Communications Inc. Tuesday broadened
its product portfolio to include streaming media services from audio and
video delivery tech firm burst.com
Inc.
for $5 million.

But the deal is a drop in the bucket compared to the $1.3 billion in cash
and stock that SBC picked up when it agreed to grant
long-term leasing rights of 3,900 communications towers to SpectraSite, Inc.

Burstware, burst.com’s flagship product, provides high quality delivery of
full motion video and CD-quality audio over IP-based networks. The company
has built an international patent portfolio covering bursting, video
delivery scheduling, and rapid casting.

In addition to gaining Burstware Internet video and audio delivery
technology for deployment over its expansive digital subscriber line
network, SBC picked up a seat on burst.com’s board of directors.

Richard Lang, burst.com chairman and chief executive, said the firm looks
forward to expanding its relationship with SBC as they continue to roll out
their broadband initiatives.

“We are very pleased to announce the $5 million investment from SBC, a
company which has made a powerful commitment to delivering state-of-the-art
multimedia services over its broadband infrastructure,” Lang said.

Tom Kuckelman, SBC vice president of strategic planning said its investment
is part of SBC’s drive to become the largest single provider of advanced
broadband services in the U.S.

“We are making this investment in burst.com because we believe its
cutting-edge solution could be a key step toward delivering the highest
quality video and audio over DSL,” Kuckelman said. “We believe that our
investment in burst.com is consistent with our goals.”

SBC currently operates more than 61.2 million access lines in the U.S., its
“Project Pronto” national DSL expansion program is on target to land the
Texas-based telecom into an to an additional 30 markets by the end of next
year. Its DSL platform is the ideal vehicle for delivering advanced audio
and video services.

But the means to stream media over revved up copper is just part of SBC’s
plans for bandwidth hungry wired line customers in the U.S.

SBC already provides wireless services to more than 12.2 million customers.
Its massive deal with SpectraSite allows the wireless communications firm
to expand services to the top 50 metropolitan markets in the nation and
marks a major milestone for both SpectraSite and the industry.

In order to gain the exclusive rights to almost 4,000 SBC communications
towers over the next five years SpectraSite, a division of SpectraSite
Holdings Inc. is shelling out $983 million in cash and
$325 million in common stock to seal the deal.

Under the terms of the transaction, SpectraSite will have exclusive lease
rights to 3,900 SBC towers, and will be able to sublease space on the
towers to third party tenants. Additionally, SpectraSite has the option to
purchase the 3,900 SBC towers at the end of the lease terms.

SBC Wireless has agreed to sublease space from SpectraSite on the towers
for approximately $65.5 million per year. The transaction is expected to
close in increments beginning in the fourth quarter of this year, and is
subject to customary closing conditions.

SBC’s towers are located in major metropolitan markets throughout the
nation with significant tower concentrations in Los Angeles, San Diego, San
Francisco, Boston, Washington D.C., Baltimore, Philadelphia, Dallas, St.
Louis, Las Vegas, Chicago, and Cleveland.

When the deal is done, SpectraSite will control over approximately 9,000
towers in the U.S., clustered in metropolitan markets. It may cement
SpectraSite’s position as the leading tower provider for wireless service

s
to the top 50 metropolitan markets.

Jim Kahan, SBC senior executive vice president of corporate development
called the deal a “win-win” for both parties.

“This is a deal that has significant financial benefits for both parties,
capitalizes on their respective core strengths and creates a long-term,
strategic relationship between SBC and SpectraSite,” Kahan said. “We’re
confident SpectraSite has the expertise and network operating capability to
manage our tower assets. We’ve received great feedback directly about their
performance from their other customers.”

Stephen Clark, SpectraSite chief executive officer said the deal with SBC
is not just about transforming the company. Clark said the transaction
would impact the entire wireless industry.

“It strengthens our position as the undisputed leader in the top 50
metropolitan markets, and gives us the critical mass to be a long-term
winner in this business,” Clark said.

Clark said that when combined with its Nextel and AirTouch
portfolios, currently held by Verizon
, SpectraSite would be the tower provider of choice for any
wireless carrier looking to launch or expand coverage in a major U.S. market.

In addition to the premium location of the SBC towers, they have an average
capacity of 3.75 tenants per tower, which represents the potential for
extremely attractive recurring revenue stream on a per tower basis for
SpectraSite.

The transaction represents tremendous long-term value for SpectraSite
because it includes an exclusive agreement to build or buy all of the new
towers required by SBC over the next five years.

SBC estimates that the build-to-suit agreement will include a projected 800
towers.

But SpectraSite executives anticipates that the tower total will be much
higher, because SBC is at the forefront of the wireless industry in terms
of new technology rollouts.

Tim Biltz, SpectraSite chief operating officer said its existing portfolio,
combined with SBC’s portfolio and the exclusive build-to-suit agreement
bolsters puts SpectraSite in the perfect position to take full advantage of
the explosive growth in the wireless industry.

“Wireless usage is highest and new applications are rolled out first in the
major metropolitan markets,” Biltz said, “which means demand will continue
to be the greatest in these markets. SpectraSite is in an unparalleled
position to capitalize on the growth of existing technology and the
introduction of new technologies in the wireless industry.”

Based in Cary, North Carolina, SpectraSite is one of the leading providers
of shared antennae sites and outsourced network services for wireless
communications and broadcast industries in North America. It owns or
manages more than 15,000 sites, including 3,474 owned towers, in 98 of the
top 100 markets in the U.S.

At the close of the SBC deal, SpectraSite is set to own or manage more than
20,000 sites, including nearly 9,000 towers for wireless communications
providers.

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