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Thermo's management
believes that telecommunications service is essential to the economy and a key
driver of the economy's growth. Ironically, almost all companies in the sector
are being confronted, either directly or indirectly, with inappropriate capital
structures, unrealistic expectations of management and investors, and an
evolving regulatory environment. The problems of the industry are being
exacerbated by an almost complete absence of new capital due to the uncertain
industry conditions and indeterminate valuations. Thermo believes that there
are attractive investment opportunities in companies with compelling cash flow,
competitive advantages, and accomplished management teams.
Thermo has
made seven direct investments in the telecommunications industry through Thermo
Telecom Partners LLC.
- Xspedius Management Corp. LLC ("XMC"
www.xspedius.com). Thermo
made a substantial investment to support the management team that created XMC.
Through its investment, XMC acquired substantially all of the assets of e.spire
Communications, Inc. ("e.spire") pursuant to a sale order by the US Bankruptcy
Court. XMC acquired e.spire's competitive local switching and fiber assets in
36 markets spanning 19 states. XMC is an integrated communications provider and
offers traditional local and long distance, dedicated Internet access, and
advanced data solutions, including ATM and frame relay. Thermo has committed
additional capital to facilitate XMC's turnaround and growth. The e.spire
assets and operations acquired by XMC have an original invested capital basis
of $1.6 billion and generated approximately $200 million of revenue in 2002 and
$250 million of revenue in 2003.
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Xspedius Holdings Corp. ("XHC"
www.xspedius.com).
Thermo also invested in XHC, a competitive communications carrier based in Lake
Charles, Louisiana. XHC offers integrated voice, data and Internet services to
small and medium-sized businesses throughout the southeastern states, and
offers dedicated Internet service through SDSL and T-1's. Thermo believes that
XHC's management team has created one of the best-run competitive carrier
organizations based on its low cost of operation, high growth rate and fully
funded business plan. Effective April 1, 2003, Thermo combined the businesses
of Xspedius and e.spire into one company which is now operating under the name
Xspedius Communications.
- MPower Communications ("MPower"
www.mpowercom.com). In 2002, Thermo took control of the
Texas assets of MPower Communications. During 2003, these assets were
effectively separated from MPower, and independently operated since April 2003
by Xspedius Communications on behalf of Thermo under a management contract and
a lease.
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FiberLight, LLC, formerly Xspedius Fiber Group, ("FiberLight”
www.fiberlight.com.)
ACSI Network Technologies, Inc. was acquired by Thermo on November 1, 2003 and
is now operating under the name FiberLight, LLC. FiberLight sells and leases to
third parties, including other communications companies, municipalities and
large enterprise clients dark fiber and conduit owned by the company.
FiberLight also provides this same client base with turnkey fiber optic design,
construction and project management services. The company's principal assets
are located in California, Maryland, Georgia, Florida, Texas, Virginia and the
District of Columbia. Thermo is providing funding to a seasoned management team
and expects to help management pursue its strategy of acquiring additional
distressed dark fiber assets throughout the U.S.
- Globalstar Satellite Communications ("Globalstar"
www.globalstar.com).
Globalstar is the world's most widely used satellite phone service offering
voice and data services from virtually anywhere in over 100 countries. Founded
in 1991 and funded with in excess of $4 billion of debt and equity, Globalstar
launched over 50 satellites which are in low earth orbit and provide the
backbone for the system. Globalstar declared bankruptcy in February of 2002
when it was unsuccessful in restructuring its debt. At the completion of its
restructuring in the first quarter of 2004, Thermo controlled 81% of the
company. Thermo believes that satellite communication for both voice and data
represents a small, but growing, and vital subset of the communications
marketplace. Given its global reach, the system's ability to transmit voice and
data inexpensively from locations unserved by any other communications
infrastructure, and new sponsorship from Thermo resulting in a debt-free
balance sheet, Globalstar is expected to grow both revenues and profits
dramatically.
- Thermo Credit LLC ("Thermo Credit"
www.thermocredit.com). Thermo Credit is a receivables
funding company focused on opportunities in the telecommunications industry.
Thermo is sponsoring a management team of industry professionals and has fully
funded its business plan. Thermo believes that there is a growing demand for
capital from small companies with sales of $10 - $25 million a year who because
of their size and their exposure to the telecommunications industry cannot
raise sufficient capital to run and grow their businesses. Thermo initially
focused on long distance and operator-assisted calls, considered to be the
telecommunication industry's highest quality receivables and currently account
for $108 billion of the expanding $366 billion U. S. telecommunications market,
and has recently factored its first CLEC client. Thermo believes that there is
no other factoring company solely focused on this micro-cap, telecommunications
niche, and as such believes that there is significant opportunity for a
telecommunications factoring company due to the large size of the market
opportunity, the barriers to entry, and positive growth in the
telecommunications industry.
- Meritage Private Equity Fund, L.P. ("Meritage"
www.meritagefunds.com). Meritage provides private equity
to companies focused on communications networks and communications services
with areas of focus in broadband, wireless and outsourced services. Thermo is
an investor in the fund which is primarily an investor in early stage growth
companies. Thermo has also made direct co-investments in Meritage portfolio
companies including Xspedius Communications.
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