Two Local Broadband ISPs Merge

An ISP in southern California merges with an ISP in northern Mexico in a deal made easier by the fact that both are traded on the Over The Counter Bulletin Board (OTCBB).

by Michael Singer of siliconvalley.internet.com [April 29, 2002]

Hoping that safety in numbers thing rings true, two lesser-known broadband ISPs said Friday that they would join forces.

Tehachapi, Calif.-based Las Americas Broadband, Inc. (OTCBB:LABN) said it will merge into USA Broadband, Inc. (OTCBB:USBU) in an 8:1 stock deal. There are still a host of approvals that the deal is expected to go through, but the companies anticipate that the transaction will close later this year.

The companies said Las Americas' shareholders are expected to own approximately 29 percent of the surviving company's common stock on a fully-diluted basis after the merger occurs. Further, Richard Lubic, currently president and chief executive officer, would become chairman and chief executive officer of the combined company.

The deal is a boon for USA Broadband. Las Americas, which develops and operates cable television systems and broadband networks for video, data, and Internet, is constructing a 1,300-mile broadband network in the Northern Baja California region of Mexico.

Las Americas Broadband currently has a contract to manage Cable California, an entity organized under the laws of the United States of Mexico, which has a 30-year advanced telecommunications broadband concession from the Mexican government to construct and operate one of Latin America's largest fiber-optic networks. The 750-mhz network will provide high-speed Internet, telephony, data and multi-channel cable television to residents and businesses in Northern Baja. Las Americas said it wants to acquire the majority control of the company through a Mexico subsidiary. Las Americas, through a wholly owned operating subsidiary, also owns and operates a 750-mhz cable television system serving approximately 2,000 subscribers in Kern County, California.

Shares of USBU closed trading on Thursday down 1.6 percent at $3.05 on light volume. Shares of LABN closed trading on Thursday down 20 percent at $0.16 on light volume.

"We are excited at the opportunity to build on the progress that Las Americas has made in bringing advanced cable television services to targeted markets in California and in Northern Baja, Mexico," said USA Broadband CEO Edward Mooney.

Petaluma, Calif.-based USA Broadband formerly (Optika Investment Company, Inc.) initially targeted the multiple dwelling unit (MDU) market and serves subscribers through its primary operating subsidiary Cable Concepts, Inc. (dba direct Digital Communications). The company has been seeking to acquire or develop additional operating assets and subsidiaries to pursue market opportunities in targeted geographic markets.

Last month USA Broadband signed an agreement to acquire Verizon's MDU digital satellite video systems and property access agreements located in California and Texas and covering approximately 5,000 MDU subscribers. Financial terms were not disclosed.

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