re: trading halt issued COMMANDER ACQUIRES iBurst Mobile...

re: trading halt issued COMMANDER ACQUIRES iBurst Mobile BROADBAND CARRIER
Tuesday 28th June 2005
Acquisition of PBA
Commander today announced its acquisition of an 80% majority interest in Mobile Broadband Carrier, Personal Broadband Australia Ltd (“PBA”). Commander has an option to acquire the remaining 20% after 36 months.
The purchase price paid by Commander for the issued capital was $5.00. Commander has also acquired secured convertible notes in a principal amount of $18m for a purchase price of $1.00.
Commander has committed to provide PBA with working capital of up to $15m through a first ranking secured debt facility which is forecast to be fully repaid during FY08.
Commander’s obligation to provide funding is staged and the funding is subject to PBA achieving key performance targets. On a stand alone basis, in FY06, PBA is expected to achieve revenue of $15m and an EBITDA loss of $1.5m. However the business is expected to become accretive for Commander during the latter part of FY06.
Broadband Strategy
As part of its FY05 results presentation in August, Commander intends to announce its wider Broadband access strategy. As part of that announcement Commander will provide the market with a more detailed review of this acquisition within the overall business and in the context of its wider Broadband strategy. Commander is able to confirm that it remains on track to deliver its earnings result guidance provided for FY05.
The PBA iBurst Network
PBA has invested $65m in obtaining spectrum licenses and deploying wireless mobile broadband infrastructure in Sydney, Melbourne, Brisbane, Canberra and the Gold Coast. This established mobile data network is based on iBurst technology from ArrayComm and supports high speed wireless download speeds to both fixed Desk Top applications and to Notebook applications.
A specific advantage of the iBurst technology is its scalability in response to demand. While the Network is fit for purpose with a footprint already covering almost 3,500 sq kms and over 5.6m people, expansion for additional capacity in existing sites and enhanced coverage is cost effective and can be deployed when and where customer demand requires.
Characterised by extremely high spectral efficiency and dynamic radio management capabilities the iBurst technology offers best in class economics for wireless broadband services.
Commander satisfies a number of near term strategic objectives through the acquisition including:
• Data value added services. As a major supplier of Notebooks to the Australian market, Commander can significantly expand its relationship with its customers by the provision of always on high speed, secure, mobile broadband access. The ability of an “information intensive individual” to access critical applications, information and email communications at work, at home, interstate and on the move is rapidly increasing in demand as mobile data from cellular networks demonstrates improved capability. The ability to transition all the benefits of a tethered PC to a true mobile workplace will substantially enhance Commander’s current mobility product offering.
• Direct customer access strategy for last mile fixed wire replacement. Commander has agreed a development and commercialisation program with Kyocera which will enable existing and new Commander customers to be directly connected to Commander’s IP network over the iBurst wireless network. The application has the potential to allow Commander to fast track its broadband deployment and most importantly will provide customers unable to be reached by traditional xDSL services due to lack of fixed infrastructure, both voice and data broadband services.
While the acquisition is primarily intended to enhance Commander’s existing data offering, and the business case stands on that basis, the acquisition of PBA also provides Commander an opportunity to advance its strategy to provide carrier grade “Telephony over wireless Broadband”. With this objective in mind Kyocera has supported the transaction by agreeing to defer (on an interest free basis) payments due from PBA and make them subject to delivery of the technical enhancements which will enable Commander to provide Telephony over Broadband to its fixed wire voice customers.
Commander’s acquisition of PBA facilitates a number of longer term objectives.
• The satisfaction of the needs of information intensive individuals provides Commander the opportunity to enter the SME sector with bundled Data products and services.
• The direct physical connection with customer specific equipment allows the introduction of network based applications such as ASP services and SoftSwitch functionality.
The acquisition also brings Commander into the carrier regime which will cause Commander to become subject to USO obligations however the cost impost will be quickly negated when last mile connectivity is deployed