Covad Announces Third Quarter Operating Statistics and Operating Improvements; Continuing Cost Control Measures Yield Significant Operational and Capital Improvements

Business Wire, Oct 19, 2001

Business Editors

SANTA CLARA, Calif.--(BUSINESS WIRE)--Oct. 19, 2001

Covad Communications (OTCBB:COVD), the leading national broadband services provider utilizing DSL (Digital Subscriber Line) technology, today announced operating statistics as of September 30, 2001.

-- Covad has approximately 346,000 lines in service on its network, a four
percent increase from June 30, 2001. The company delivered this net increase of
13,000 lines during the quarter after disconnecting or migrating the lines that
were formerly on the Bluestar network. This increase is also after the
continued disconnection of subscribers from some of Covad's financially
troubled resellers.

-- Approximately 52 percent of Covad's total lines are business lines and 48
percent are consumer or residential lines.

-- Covad's wholesale channel represents 96 percent of Covad's total lines while
its direct channel efforts represent four percent.

-- Thirteen percent of Covad's total lines are served through resellers for
whom Covad recognizes revenue only when it is paid, a one percent reduction
from the previous quarter.

Several cost reduction initiatives implemented during the first nine months of this year reduced Covad's cash usage in the quarter to a monthly average of less than $25 million, resulting in a cash balance at the end of the quarter of approximately $460 million, including cash reserved for the anticipated settlement of claims in its bankruptcy proceeding. Covad expects its monthly cash usage to continue to improve during the fourth quarter, extending Covad's current cash resources into the third quarter of 2002.

With this reduced cash usage coupled with its projected additional subscriber additions, Covad projects its future capital requirement to fully fund the business to positive cash flow has been reduced to less than $100 million. Covad's cost cutting initiatives include the previously announced shutdown of its Bluestar subsidiary, closing or consolidating office facilities, and improving operational efficiencies through such initiatives as line sharing and self installation. Covad has continuously streamlined its business, including workforce attrition and targeted workforce reductions, resulting in a significant reduction of Sales, General & Administrative costs (SG&A). The company will continue to review all aspects of the business and make changes where appropriate.

"We are pleased with the progress we have made to lower our capital needs through continued growth in subscribers, ongoing cost reduction measures and anticipated savings from operational initiatives," said Charles E. Hoffman, Covad CEO and president. "Our line count has increased in a difficult economic environment, which demonstrates that demand for broadband is still solid. I am especially pleased that in these tough times we have improved our major operating metrics including installation intervals, mean time to repair and network availability."

About Covad Communications

Covad is the leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, IP and dial-up services through Internet Service Providers, telecommunications carriers, enterprises, affinity groups, PC OEMs and ASPs to small and medium-sized businesses and home users. Covad services are currently available across the United States in 94 of the top Metropolitan Statistical Areas (MSAs). Covad's network currently covers more than 40 million homes and business and reaches approximately 40 to 45 percent of all US homes and businesses. Corporate headquarters is located at 4250 Burton Drive, Santa Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web Site: www.covad.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

The statements contained in this press release that are not historical facts are "forward-looking statements," including statements concerning Covad's anticipated reduction of costs, ability to continue as a going concern, sufficiency of Covad's cash on hand, additional capital requirements, ability to secure additional financing and the statements made by the president and CEO in this release. Actual events or results may differ materially as a result of risks facing Covad or actual results differing from the assumptions underlying such statements. Such risks and assumptions include, but are not limited to, Covad's ability to emerge from bankruptcy proceedings in a timely manner, to raise additional capital and address its financial issues, to continue as a going concern, to continue to service and support its customers, to successfully market its services to current and new customers, to manage the consolidation of sales to a fewer number of wholesale customers, to successfully migrate end users, Covad's ability to generate customer demand, to achieve acceptable pricing, to respond to competition, to develop and maintain strategic relationships, to manage growth, to receive timely payment from customers, to access regions and negotiate suitable interconnection agreements,