Integra Telecom Buys Electric Lightwave; Acquisition of Customers and Eight Metropolitan Area Networks Expand Service Area, Solidify Integra's Market Strength

Business Wire, Feb 7, 2006

PORTLAND, Ore. -- $450 Million Financing Ranks as One of the Largest on List of National Telecom Deals

Integra Telecom, Inc., a provider of local, long-distance and Internet services for small and mid-size businesses, today announced that it has signed an agreement to purchase Electric Lightwave, Inc. (ELI) for $243 million in cash plus the assumption of approximately $4 million in capital lease obligations.

Under the terms of the agreement, Integra will purchase ELI, including its assets and customers, from Citizens Communications (NYSE:CZN). The parties expect to complete the transaction in the third quarter of 2006 upon obtaining necessary governmental and other approvals.

Acquisition Solidifies Market Strength

With the acquisition of ELI's network assets and customer base, Integra will become the most cash profitable and one of the largest competitive local exchange carriers (CLECs) in the West. Combined, the companies will have more than $300 million in annual revenue and more than $100 million in pro-forma 2006 EBITDA, before any merger synergies. Approximately 60 percent of the two companies' revenues derive from geographic markets and networks that overlap, creating the opportunity for significant network efficiencies and synergies. The acquisition will increase the number of Integra's metropolitan service areas from 18 to 23 and expand the number of states in which it serves from five to eight.

Most importantly, the combined companies will enjoy important strategic advantages resulting from ELI's eight-market, 2,200 route mile (160,000 fiber miles) metropolitan area network, with direct fiber access into over 580 major commercial buildings. Many other competitive local exchange carriers are scrambling to find network alternatives in response to recent FCC rules that increase the cost of leasing network from the Bell companies. Integra, by acquiring ELI's metropolitan area network, becomes one of the first to insulate itself from this unpredictable landscape of telecom regulation.

"These robust metropolitan fiber networks will substantially increase our operating strength and provide a meaningful and sustainable competitive cost advantage over other local carriers that rely exclusively on leasing network from the Bell companies," said Dudley Slater, chief executive officer of Integra Telecom.

In addition to the metropolitan area networks, Integra will also own and operate ELI's unique 4,700-mile, long haul network - one of the largest of its kind in the western United States. The unique value of this network is evidenced by a blue-chip list of other carriers that lease connectivity from ELI to access their customers.

"We are eager to enhance this network and strengthen our relationships with those that rely on the connectivity we provide," added Slater.

Benefits to Customers

"I'm delighted for our customers," continued Slater. "We will be offering a stronger regional and local telecommunications network alternative, and we will be better equipped to offer unique and powerful high-bandwidth data products, which are increasingly important to the business customers we serve."

Upon completing the integration, Integra will expand the product sets and services currently offered by ELI to include those offered by Integra, including those that are tailored to the smaller business customer. Doing so will increase the addressable markets in the important new service areas that come with the ELI acquisition: Phoenix, Ariz.; Boise, Idaho; Sacramento, Calif.; as well as Olympia and Spokane, Wash. Today, Integra serves tens of thousands of customers, representing 10-15 percent of the small to mid-sized businesses, within most of the metropolitan areas in Oregon, Washington, Utah, Minnesota and North Dakota. "We look forward to introducing ELI customers to Integra's high-touch brand of service where we staff customer service and other customer 'touching' personnel locally in each major market we serve," said Slater.

"This is an excellent opportunity for ELI employees and customers," said Dan McCarthy, executive vice president and chief operating officer of Citizens Communications. "Integra is a carrier we respect with a proven track record of success."

Integra Telecom Markets Served Post-ELI ((a) New Markets with Acquisition)

OREGON

--Portland, Salem, Eugene

WASHINGTON

--Vancouver, Seattle, Tacoma, Bellevue, Everett, Spokane(a) and Olympia(a)

UTAH

--Salt Lake City, Ogden, Provo

MINNESOTA

--Minneapolis, St. Paul, Baxter, St. Cloud, Prior Lake

NORTH DAKOTA

--Fargo, Grand Forks

ARIZONA

--Phoenix(a)

IDAHO

--Boise(a)

CALIFORNIA

--Sacramento(a)

Industry Consolidates: Leaders Emerge

"Successful CLECs like Integra are consolidating the industry, creating formidable regional competitors. Integra has the best operating metrics in its sector," stated Carlyn Taylor, senior managing director of FTI Consulting, Inc., an industry advisory firm, who along with FTI's investment banking entity, FTI Capital Advisors, LLC, served as financial advisor to Integra for this transaction.