Dec. IGI Telecom Investment Research 2006 TELECOMMUNICATIONS

In This Issue Mergers & Acquisitions

Level 3 to buy CDN ...... 2 TOP NEWS Liberty acquires DirecTV ...... 3 BigBand files for IPO BigBand Networks Inc. announced that it has filed a Golden buys registration statement on Form S-1 with the US Securities and Corbina stake4 Exchange Commission relating to the proposed initial public offering of its common stock. The shares of common stock to Motorola to buy be sold in the offering are expected to be offered by BigBand Tut Systems..5 Networks and certain of its stockholders. Morgan Stanley & Co. Incorporated and Merrill Lynch & Mauritius to sign Co. will act as joint book-running managers for the offering. In up to EASSy..6 addition, Jefferies & Company Inc., Cowen and Company LLC, and ThinkEquity Partners LLC will act as co-managers for the CTI offering. The number of shares to be offered and the price range buys Ryder .. 8 for the offering have not yet been determined. When available, a copy of the prospectus relating to this offering may be obtained Vodafone sells by contacting Morgan Stanley & Co. Incorporated, 180 Varick off Swisscom Street, New York, New York 10014, Attention: Prospectus Mobile Department; by calling 212-761-6775 or 1-866-718-1649; or stakeVodafone by emailing [email protected]; or Merrill Lynch sells & Co., 4 World Financial Center, New York, New York 10080 off Swisscom (telephone: 212-449-1000). Mobile stake..9 A registration statement relating to these securities has been filed with the US Securities and Exchange Commission but has not yet become effective. These securities may not be Published Monthly Information Gatekeepers Inc. sold, nor may offers to buy be accepted prior to the time that 320 Washington St. Ste. 302 the registration statement becomes effective. Brighton, MA 02135 Tel: 617-782-5033 Fax: 617-782-5735 Huawei accepts offer to purchase Huawei’s entire E-MAIL: [email protected] WEBSITE: igigroup.com stake in H3C

© Information Gatekeepers Inc. 2006... Huawei, a provider of next-generation All rights reserved. No part of this publication may be reproduced, stored in a telecommunications for operators around the data base or transmitted without prior written permission of the publisher. (ISSN world, announced that it has accepted a bid offer from 3Com to 1531-4871) purchase Huawei’s entire stake in their joint venture, Huawei- 3Com (“H3C”). In accordance with H3C’s BT Group to buy PlusNet for $126.8 shareholders’ agreement, the bid process million was initiated by 3Com on November 15, BT Group will buy British ISP PlusNet 2006, and a bid offer was accepted by for $126.8 million. This deal represents a Huawei on November 28, 2006 (Beijing further consolidation in UK’s broadband time). H3C will become wholly owned by market. Earlier last month, Carphone 3Com after the completion of the transaction. Warehouse agreed to buy Time Warner’s Mr. Guo Ping, senior vice president AOL for $697 million. BT’s new broadband of Huawei Technologies, said, “The subscribers had reduced to 22 percent in the divestment will further enable Huawei to quarter ending September 2006, from 25 focus its efforts on its core business, percent in the preceding quarter. PlusNet will strengthen our leadership position in the ALL retain its brand name; the ISP has around IP-based FMC (Fixed and Mobile 200,000 customers and earned revenues of Convergence) solutions market, and create $77 million in the fiscal year ending June long-term value and potential growth for our 2006, apart from a net income of $7.3 million. clients. In related news, O2, which took over Over the past three years, 3Com and ISP Be earlier on this year, claims that it now Huawei have contributed a great deal to the provides ASDL2+ services to around 25 development of H3C. H3C has become one percent of the country’s population and that of the leading global suppliers of IP this could increase to 50 percent to 60 networking products and solutions and we percent by summer 2007. wish them every success in the future.” Huawei will continue to comply with Vodacom to acquire stake in Wireless its commitments under the existing joint Business Solutions (WBS) venture agreements. Vodacom plans to acquire a stake in Wireless Business Solutions (WBS) in South CARRIERS Africa as a strategic move towards ensuring its place in the South African broadband Level 3 to buy CDN wireless market. Wireless Business SAVVIS Inc., a provider of IT Solutions (WBS) operates under the name infrastructure services for business iBurst and is one of the four WiMAX license applications, announced that it has entered holders in the country. into a definitive agreement to sell its content Currently, iBurst does not have a delivery network (CDN) services business WiMAX strategy, although it is in the testing to Inc. for $135 phase of WiMAX technology and gives million in cash. broadband Internet services through fixed Upon closing, the transaction is wireless networks. Details regarding the deal anticipated to result in net proceeds to were not disclosed. SAVVIS of approximately $125 million to $130 million after fees, expenses, and taxes. Swedish TeliaSonera acquires Cygate for The purchase price is subject to $80 million certain customary post-closing working Sweden’s TeliaSonera acquired capital adjustments. The transaction is Cygate after buying a major stake of 98.66 expected to close by the middle of the first percent from Swedish Bure Equity for $80 quarter of 2007. million. Cygate currently supplies IP

2 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 networks and systems in the Nordic region. VimpelCom to buy 90 percent of The acquisition was a strategic move taken ArmenTel from Hellenic Telecom for by TeliaSonera in reinforcing its integrated $436.3 million IT and telecoms solutions business. VimpelCom declared that it has According to TeliaSonera’s CEO, Anders agreed to Hellenic Telecommunication Igel, integrated IT and telecoms solutions Organisation’s terms to purchase the latter’s business will be a major growth area in the 90 percent shares in ArmenTel for about future. $436.3 million, as well as its debt of $51.028 million. VimpelCom said that the deal would Hutchison courts suitors be finalized before the end of 2006. The Hutchison Telecommunications finalization of the merger is subject to certain International Limited states that it has been conditions, which include the Armenia approached by various potentially interested government’s approval. parties regarding a possible sale of its equity interests in Hutchison Essar Limited, the Vodafone confirms interest company’s mobile operations in India. No Vodafone Group (“Vodafone”) has agreement with respect to such possible sale noted recent speculation regarding a has been entered into to date. The company potential acquisition of Hutchison Essar reiterates that there is no assurance that a Limited (“Hutch Essar”) in India. sale may result from these approaches. The Board of Vodafone continues to believe the mobile market in India has great Hanaro agrees to acquire Onse potential and is therefore considering the broadband subs acquisition of a controlling interest in Hutch South Korea-based broadband Essar. Such a transaction would be service provider Hanaro Telecom (Hanaro) consistent with its stated strategy of seeking has signed a deal to acquire Internet selective acquisition opportunities in customers from its rival Onse Telecom. developing markets. Hanaro agrees to pay $265 to Onse for each The process is at an early stage and user who moves. Hanaro hopes to add may or may not lead to a transaction. almost 140,000 broadband subscribers A further announcement will be made through this deal. in due course. Onse had 296,894 cable modem broadband users at the end of June 2006 Liberty acquires DirecTV (market share of 2.3 percent); Hanaro had Liberty Media Corporation (“Liberty”) 3.6 million broadband customers (28.2 announced that it has entered into a percent market share) by the end of June definitive agreement with News Corporation 2006. Incorporated in July 1996, Onse (“News”) to exchange Liberty’s 16.3 percent entered the country’s ILD telephony market stake in News for News’s 38.5 percent stake in October 1997. In August 2000, it launched in DirecTV Group Inc. (“DirecTV”); regional its broadband ISP “Shinbiro sshark,” via its sports networks in Denver, Pittsburgh, and fiber-to-the-curb (FTTC) infrastructure. It Seattle; and cash. applied for bankruptcy in April 2003. Onse “We are happy to become the largest was under control of the Suwon District Court shareholder in the world’s largest satellite till late September 2006, when Ubistar television provider. Chase Carey and the acquired it for $73 million. DirecTV team have done a fantastic job, and

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 3 we look forward to the strategic benefits of based mobile-phone joint venture with them joining the Liberty family,” said Liberty Australian-based Telstra to New World President and CEO Greg Maffei, who added, Development, its parent firm. The Dow Jones “During 2006 we converted many passive report stated that New World Holdings plans investments into strategic operating to sell the stake for $321 million. businesses, but this transaction is the largest After selling its stake in CSL New and most important. DirecTV and the World Mobility Group, New World Mobile regional sports networks represent a critical plans to pay a dividend of $0.16 per share step in our efforts to transform Liberty Media to its shareholders. The report also said that into a well-positioned, focused operating Simon Lo, a non-executive director of New company.” World Mobile, has consented to buy New “We are extremely pleased with the World Development’s 58.04 percent stake successful, tax-efficient conversion of our in its mobile unit. News holding. Our investment in DirecTV will create financial, operating, and strategic Golden buys Corbina stake flexibility,” said Liberty Chairman John Golden Telecom Inc., a facilities- Malone. “Liberty’s ownership of News has based provider of integrated created tremendous value for our telecommunications and Internet services in shareholders, and we are grateful to Rupert major population centers throughout Russia Murdoch and News management.” and other countries of the Commonwealth of Independent States (“CIS”), announced Telmex plans to invest $100 million to that it has executed a binding Term Sheet enter fixed-line residential market in 2007 with Dawn Key Limited, a company which Mexican telecom firm Telmex’s owns 71.11 percent of shares of Inure Peruvian unit intends to invest $100 million Enterprises Ltd., Cyprus (“Inure”). Inure is in its network in 2007. This would help to jointly controlled by Mr. Alexander Mamut consolidate its position in the fixed-line and Renova Capital and owns 99 percent of market. According to BNAmericas reports shares of ZAO Cortec. Under the Term (citing local business daily Gestion), Telmex Sheet, Golden Telecom will receive 51 will look to expand the coverage in the capital percent ownership in ZAO Cortec together city and nearby provinces to compete with with its wholly owned subsidiaries ZAO fixed-line firm Telefonica del Peru (TdP). Investelektrosvyaz, ZAO Kabelstroy, and Telmex entered Peru February 24, 2004, other subsidiaries (jointly doing business as when it acquired almost all assets of AT&T the Corbina Telecom Group) (“Corbina”) in Latin America (ATTLA), including the ones exchange for an issue of 8 percent of Golden in Argentina, Chile, Brazil, and Colombia. Telecom’s shares calculated on a post- Telmex operates primarily in the SME and acquisition basis and $10.0 million in cash. corporate sectors. ATTLA entered Peru in The transaction is subject to approval by the 2000 by acquiring FirstCom Peru. appropriate regulatory bodies in the United States and Russia, and upon execution and New World Mobile Holdings to sell its 23.6 consummation of an ownership interest percent stake in mobile joint venture in purchase agreement. Telstra In late 2005, Corbina commenced the New World Mobile Holdings would be rollout of a FTTB network which, to date, selling its 23.6 percent stake in a Hong Kong- covers approximately 2,400,000 apartments

4 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 in Moscow, comprising two-thirds of all technology and one which provides great households in the city. The network serves potential for our future growth. Local loops approximately 110,000 broadband Internet based on this access type support speeds customers. Corbina adds more than 10,000 of 100Mbps to every end user, a speed which customers per month, which is one-third of is 200 times faster than ADSL solutions all incremental broadband users in Moscow. currently on offer in Russia. FTTB is one of Corbina’s network and presence in its the best platforms to meet current and markets position Corbina as the leader in foreseeable future needs such as VoIP, terms of customer base net growth. Golden instant messaging, video conferencing, expects that Corbina’s strong position and IPTV, Video-on-Demand and rapidly growing market presence will be further fueled by value added services such as interactive increasing network reach. Corbina primarily entertainment.” targets residential and SME customers in the corporate segment in Moscow by focusing FIBER OPTICS on off-the-shelf product offerings, including broadband Internet and switched voice Motorola to buy Tut Systems services. Corbina enjoys impressive brand Motorola Inc. and Tut Systems Inc. recognition and strong customer loyalty. With announced that the two companies have several years of experience in running a signed a definitive merger agreement, under DAMPS-based fixed-to-mobile convergent which Motorola will acquire all of the services business, Corbina has not only built outstanding shares of Tut Systems common a base of loyal high-usage customers, but stock for $1.15 per share in cash. The has also gained first-hand knowledge on transaction has a total equity value of how to successfully provide GSM-based approximately $39 million on a fully diluted convergent services. In the light of the strong basis. potential growth of this business, it is Tut Systems provides carrier-class mutually agreed to issue an initial public end-to-end digital video encoding, offering of Corbina in Moscow, London, or processing, and distribution products. Their New York by the end of 2008, subject to solutions support MPEG-2 and MPEG-4 market conditions and regulatory approvals. AVC video compression, local ad insertion, Commenting on the potential forward error correction, and real-time acquisition, Mr. Jean-Pierre Vandromme, conditioning of video and audio. Today, more chief executive officer of Golden Telecom, than 160 service providers worldwide deliver noted, “In Moscow this acquisition IPTV powered by Tut Systems’ digital video overcomes Golden Telecom’s ‘last mile distribution technology. The integration of Tut deficit’ and provides us with access to Systems’ solutions with Motorola’s digital virtually every building in the city. Corbina’s video delivery solutions will expand widely developed local loop puts us on a par Motorola’s ability to help service providers with the incumbent. This acquisition supports deploy advanced video services over IP-, our strategy to develop broadband services ATM-, or RF-based network architectures. for mass markets and significantly Motorola currently has deployed 2,060 digital strengthens our position in Moscow, St. video networks and over 50 million digital Petersburg and several other large cities of video set-tops worldwide. Central Russia with a FTTB network. We “This transaction brings together the believe that FTTB is the ultimate broadband telco-aware IPTV processing capabilities of

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 5 Tut Systems with Motorola’s proven video Systems’ stockholders, and is expected to delivery expertise. Together, our combined be completed in the first quarter of 2007. portfolio will provide service providers with next-generation solutions for delivering rich FLAG Telecom to divest 15 percent to 20 video experiences into the connected home percent equity to strategic and financial — and out into the world,” said Dan Moloney, investors president, Motorola Connected Home Reliance Communications’ Solutions. “We look forward to adding the subsidiary, FLAG Telecom, valued at $1 great people, technology and video expertise billion, will divest 15 percent to 20 percent of Tut Systems to the Motorola Connected equity stake to financial and strategic Home Solutions team.” investors. The company will raise $200 “Today is an exciting day for Tut million by issuing an international convertible Systems. Our stockholders will be able to bond. Reliance has purchased FLAG receive value for their investment, while our Telecom’s assets for $200 million. employees, customers and strategic FLAG Telecom started with selling partners will benefit as we join together with bandwidth and then moved on to provide Motorola, an established, global leader in value-added services to global telecom architecting and deploying digital and IP companies. Presently, it is operating at video networks,” said Sal D’Auria, president break-even and will achieve profitability by and CEO of Tut Systems. 2007. However, sources stated that even “Motorola’s financial resources and though FLAG Telecom is controlling a customer relationships will enable us to 75,000km global cable system, investors address larger customer opportunities that have not been valuing its assets properly. were challenging as a smaller company. My team is committed to working closely with Mauritius to sign up to EASSy Motorola to ensure a rapid and seamless Mauritius will sign up for the Eastern transition.” Africa Submarine Cable System (EASSy) to Upon completion of the transaction, transform the nation into an important Indian Tut Systems will become a wholly owned Ocean hub. Etienne Sinatambu, Telecoms subsidiary of Motorola and will be integrated Ministry spokesman, said that Mauritius into the Motorola Connected Home Solutions would be the 10th nation to sign the protocol. business. Motorola intends to maintain Tut Mauritius has already signed the South Systems’ operations in Lake Oswego, Africa Far East Cable and now plans to take Oregon; San Diego, California; and part in the African satellite project. Mauritius Pleasanton, California. has so far not managed to attract interest The transaction is expected to be for other African nations; only 7 of the neutral to Motorola’s earnings per share in applicable 23 nations have consented to the first year following closing, excluding support this EASSy cable project. certain non-cash charges relating to amortization associated with acquired PacketFront acquires 42Networks intangibles and other one-time accounting PacketFront, a provider of open and transaction-related costs. access broadband networking, has acquired The transaction is subject to the Swedish company 42Networks, a customary closing conditions, including provider of technology for voice-over-IP regulatory approvals and the approval of Tut (VoIP). The acquisition reinforces

6 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 PacketFront’s position in end-to-end fantastic development into a clear market solutions for fiber-to-the-home (FTTH) leader in FTTH solutions. It is very exciting networks. The acquisition will also enable to now be able to join our forces to create PacketFront’s customers to implement a an even stronger partner for our customers.” leading VoIP solution as part of the The DRG series will complement company’s suite of services, and will further PacketFront’s current product portfolio for invigorate its innovation and fuel future FTTH with leading VoIP support — integration with related products. something network owners are increasingly 42Networks develops and distributes asking for. products and systems for VoIP incorporated “This technology reinforces our end- among other products in the DRG (Digital to-end solution and gives our customers the Residential Gateway) system. The DRG option to get leading VoIP Residential series — which allows operators and service Gateways from PacketFront,” said Stefan providers to deliver multiple broadband Gustafsson, VP product management of services with enhanced security and high- PacketFront. “With this technology in-house, quality IP telephony to residential and we believe we can further innovate and enterprise customers — has been on the create future integrated values with our other market since 1999, and is now in its fifth products. The 42Networks embedded VoIP generation. It was first developed within business will also open up a completely new Ericsson Business Innovation, and customer segment to us and strengthen our 42Networks was subsequently established technology excellence.” after a management buy-out from Ericsson. Today, the company has 50 employees, with Luna Innovations acquires rights to an annual turnover of 43 million SEK in 2005 tunable laser from Coherent and an expected annual turnover of Luna Innovations Incorporated has approximately 65 million SEK in 2006. entered into a technology transfer and “We are very excited to acquire licensing agreement with Coherent Inc. 42Networks,” said Martin Thunman, CEO of giving Luna the right to manufacture and sell PacketFront. “We have been partners since the former Iolon “Apollo” line of swept tunable 2003 and have always been very impressed lasers. The Iolon laser is a miniaturized, with the quality of its products. Operators external-cavity laser offering high keen to offer a telephony service equal to performance in a compact footprint. Such the traditional analogue PTT network are lasers were designed with systems very quality focused, and 42Networks’ integration in mind and are applicable to a technology is among the best on the market. range of fiber-optic test and measurement, The combination of the cutting-edge VoIP instrumentation, and sensing applications. technology and a similar company culture Under the agreement, Luna acquired makes this an excellent match.” manufacturing equipment and inventory “In an environment of anticipated previously used by Coherent to manufacture significant growth, not only product the lasers, as well as non-exclusive licenses excellence, but also company size matters,” to Coherent’s patents and other intellectual said Henrik Scharp, CEO of 42Networks. property rights related to the transferred “We have been working closely with technology. PacketFront since the founding of Kent Murphy, Luna Innovations’ 42Networks and we have followed their chairman and chief executive officer,

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 7 commented, “We entered into this acquired Ryder Systems Ltd for agreement with Coherent to allow us to approximately $11.0 million. compete more effectively in Luna’s existing Ryder Systems Ltd, located in fiber-optic test and measurement markets Blackburn, UK, is a European provider of by providing our customers with fast, flexible electronic and online billing services to and cost-effective test and measurement telecommunications service providers products. Acquiring this laser technology principally in the mobile-phone market. also allows us to aggressively pursue Ryder’s products — Analysis, business opportunities in new markets such SplitBill, and Dynamic Reports — are as industrial and medical sensing.” provided to blue-chip mobile-phone service Tunable laser technology is a key providers, including Vodafone, Orange, T- element in Luna’s existing fiber-optic test, Mobile, Verizon, Eircom, and Opal Telecoms, measurement, and sensing products lines. in six countries across Europe. They provide These products employ frequency-tuned business users the capability to manage their lasers to measure various aspects of the mobile and broadband services with the transmission properties of benefit of considerable cost savings to telecommunications fiber-optic components business users and service providers as well and systems. Lasers are also used in fiber- as increased customer retention for the latter. optic sensing applications such as Ryder’s products are provided as hosted, distributed strain and temperature mapping licensed, and managed solutions with a and distributed measurement of shape. The recurring license business model. Since former Iolon laser was also designed for addressing this market in 2000, Ryder high-volume manufacturing, which is a Systems has experienced annual revenue critical factor in Luna’s growth strategy. growth rates of greater than 20 percent. “The Iolon laser comes in a highly European legislation requiring businesses to reliable, miniaturized package that we accurately differentiate personal and believe will improve the scalability, business mobile use for tax purposes ruggedness and speed of Luna’s existing line ensures a compelling business case to of fiber-optic test products,” said Brian Soller, incorporate Ryder solutions in every general manager of Luna Technologies, the enterprise business workflow. Ryder test and measurement division of Luna Systems’ products are used by over 10,000 Innovations. enterprises, including most of the Times 100. “The functionality of this laser allows “This is a compelling strategic faster, more flexible solutions for our transaction that we expect will provide customers, which ultimately gives them the significant synergies between both ability to make better products at lower companies and affords growth opportunities costs.” for our customers and shareholders,” said John Birbeck, CTI Group’s chairman, VOIP president, and chief executive officer. “Our SmartBill electronic bill management CTI buys Ryder systems are successful in the USA in the CTI Group (Holdings) Inc., an wireline market, whilst Ryder’s products are international provider of electronic and online thriving in Europe in the mobile phone billing solutions and developer of VoIP market. By integrating our operations and business applications, announced that it migrating both products to the new markets

8 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 with the same resources, we have the likely to earn consolidated revenue of $820 opportunity to leverage the maximum from million this year, compared to the forecast both markets. CTI Group’s VoIP applications $684 million. For the first nine months, the for both IP Centrex and end user systems company earned $656 million consolidated will also gain new market opportunities as revenue. The company aims to earn $13.7 VoIP and mobile services merge,” said Mr. million in 2007, $21.9 million in 2008, and Birbeck. $32 million in 2009. Its consolidated nine- month net profit was $49 million on revenue Europe to sell its Swedish unit of $667 million. Spray Network to Telenor’s Glocalnet Lycos Europe, an Internet group WIRELESS owned partly by Telefonica and Bertelsmann, has decided to sell its Sweden-based Vodafone sells off Swisscom Mobile broadband Internet and telephony unit, stake Spray Network, to rival fixed-line and Vodafone announced that it has broadband operator Glocalnet (owned by agreed to sell its 25 percent interest in Norway’s Telenor) for $24.8 million. This deal Swisscom Mobile to Swisscom for a cash awaits approval by the Swedish Competition consideration of CHF4.25 billion (£1.8 Authority. Lycos Europe acquired Spray billion). Swisscom already owns 75 percent Network in August 2004. It sold Spray’s Web of Swisscom Mobile, which is the leading portal business to media firm Aller Svenska mobile operator in Switzerland. for $21 million at the end of September 2006. The consideration implies an Telenor acquired broadband service provider Enterprise Value to EBITDA multiple of 9.1x Utfors in December 2002, integrating its for the financial year ending March 31, 2007. business users with the Telenor Business Vodafone and Swisscom Mobile have Solutions Unit and shifting the residential signed a revised long-term Partner Network users to Glocalnet. By September 2006, Agreement in Switzerland with an initial five- Glocalnet had 119,000 users, with Spray year term. This will enable Swisscom Mobile adding 75,000 users to Telenor’s group total. and Vodafone customers to continue to Spray has around 45,000 telephony service benefit from Vodafone’s global products and users and 70,000 narrowband users. services such as Vodafone live!, Blackberry from Vodafone, and international roaming Samart looking to acquire major stakes services, including preferred roaming in two or three companies by this year’s arrangements. In addition, Vodafone and end Swisscom will continue to cooperate in Samart Corporation is planning to serving international corporate customers. acquire major stakes in two or three telecom Commenting on the transaction, Arun firms by the end of this year. Samart will also Sarin, chief executive of Vodafone, said, bid for its second power plant in Cambodia. “Vodafone and Swisscom have enjoyed an If approved by the Cambodian government, excellent relationship since we acquired our the project would warrant an investment of 25 percent stake in Swisscom Mobile in $273 million. Samart announced its new January 2001. We do not, however, see subsidiary, Vision and Security System Co., ourselves as the most appropriate holder of to address the requirement for Internet this minority stake in the longer-term and Protocol-based security systems. Samart is Swisscom is keen to increase its holding in

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 9 Swisscom Mobile to drive through synergies of $2.5 million). TeamTalk would subscribe in its fixed and mobile businesses. It for $6 million of Neuco (14.5 percent) therefore makes sense to sell our stake now convertible notes, apart from loaning $5 for an attractive price.” million to Neuco.

Digicel acquires Guyana-based U Mobile Golden buys TV asset Digicel Group, the fastest-growing Golden Telecom Inc. announced the mobile telecom operator in the Caribbean, signing of a purchase agreement for the announced that it acquired the Guyanese acquisition of a 65 percent interest in mobile operator U Mobile via the direct Fortland Limited (“Fortland”). The purchase acquisition of its parent holding firm. Digicel price of the acquisition is expected to be Holdings Limited (DHL), Digicel Group now approximately $50 million. Fortland holds has operations in 22 markets. This licenses for digital television in some of the acquisition enables Digicel to increase its largest cities of Russia and is to target other presence into South America after the launch major Russian cities. These licenses will be in French Guyana earlier this year. Guyana used by Golden to provide customers with a has a population of around 800,000 greater number of digital television channels, residents. The president of Guyana, Mr. higher-quality picture, and the opportunity for Bharrat Jagdeo, welcomed the move of pay-per-view programming, all using the Digicel coming to Guyana and expressed his Digital Video Broadcast (“DVB”) standard in hope that the company’s presence would MPEG-4 coding. In the future, Golden bring competition to Guyana. His sentiments expects to add additional services to were echoed by Guyana’s prime minister, customers. Mr. Samuel Hinds. Digicel has invested over DVB is the most promising television $1.2 billion in the Caribbean over the last format currently existing and one which is five years and has around 2,500 employees. rapidly growing in Europe. DVB is the most cost-effective TV broadcasting technology TeamTalk to buy 67 percent stake of and has a number of promising competitive CityLink for $12.7 million features, including the following: Mobile communications firm -A high-quality digital video with TeamTalk, which offers a variety of stereo sound broadband services, has agreed to buy 67 -A greater number of television percent of fiber-optic firm CityLink for $12.7 channels million. TeamTalk will provide $12.68 million - Interactivity in cash and debt in exchange for the stake. - Competitive rates for customers CityLink’s management team would hold the compared to analog TV rates remaining stake. CityLink, formed in 1995, - Ease of installation and use for earned revenue of $6.6 million in 2006; its analog and digital TV users growth has been 20 percent for the past four through plug-and-play DVB years. Its earnings before interest, tax, consoles depreciation, and amortization are likely to In addition, DVB signals can be increase from $2.5 million in 2006 to $3 received by mobile and smartphones, million next year. A new firm named Neuco personal computers, laptops, and PDAs. is being formed to purchase CityLink’s DVB is supported by major television assets and shares for $22.76 million (equity manufacturers, including Sony, Panasonic,

10 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 and Philips, making DVB access readily be needed in spring for the issuance of the available. The combination of access to DVB license before the end of 2007. technology, with Golden’s wide geographical ARCEP needs to quickly draft a plan presence across Russia, will further to reuse 1800MHz and 900MHz frequencies Golden’s penetration into a potential market for 3G and establish a method for using the of 11 million households in 22 major Russian current 2G frequencies for 3G. This depends cities with a population of 35 million. The on sharing by four operators that will be Fortland acquisition will enable the delivery executed only if the fourth license is of a triple-play service package, including allocated. Otherwise, it will depend upon the high-speed Internet access, digital television sharing by three operators. with about 50 channels, and VoIP. Commenting on this deal, Jean- BUSINESS Pierre Vandromme, Golden Telecom’s chief executive officer, noted, “This acquisition Ericsson buys Redback constitutes a perfect fit into Golden Ericsson and Inc. Telecom’s broadband expansion strategy in announced that they have signed a definitive Russian telecoms and will position us as a agreement under which Ericsson will acquire strong player in the media market. It will allow Redback for US$25.00 per share, or an us to complement Golden Telecom’s Triple- aggregate price of approximately US$1.9 play service offering, adding the high quality billion. The offer represents a premium of TV element to our existing broadband 60 percent to Redback’s (90-day) volume Internet and voice products in Moscow, St. weighted average stock price. Petersburg, and regions of Russia and - Ericsson offers US$25.00 per provide with access to a mass market of share in cash Russian consumers. -A total consideration of US$1.9 The purchase will also enable Golden billion after deduction of net cash Telecom to benefit from the plans of the - Cash transaction to be internally Russian Ministry of Information Technologies funded and Communications to replace analog - Redback brings leading IP edge televisions in Russia with digital televisions technology, critical in IP networks in approximately 10 years, as in other - Expands Ericsson’s IP market European countries, promoting DVB as the presence and growth national standard. Currently, the television opportunities penetration level in Russia is approximately - Expands Ericsson’s leadership in 98.6 percent, which makes Russia the next-generation IP networks largest TV market in Europe.” Redback was founded 1996 in San Jose, California, the heart of Silicon Valley, ACERP plans to issue the fourth 3G and listed on NASDAQ in 1998. Redback license in France has over 700 carrier customers in more than ARCEP is preparing the issuance of 80 countries and employs about 800 people, the fourth 3G license and will decide its including 500 R&D engineers. Fifteen of the application procedure in December 2006. In top 20 telephone carriers worldwide use addition, it plans to permit WCDMA networks Redback’s technology, including broadband to use 2G GSM frequencies. Depending routers to manage IP-based data, voice, and upon the publication date, applications might video services.

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 11 Redback has a strong position in Pacific. It had formed its Hong Kong-based multiservice edge routing technology, which division in May 2003. helps carriers deliver broadband, telephone, TV, and mobility services over Internet- Telekom Malaysia’s net profit in third based infrastructures. The company grew quarter reduces sales 33 percent for full-year 2005 and 87 Telekom Malaysia’s net profit fell 38 percent for the first nine months of 2006 to percent year-on-year to $133 million in the US$197 million. third quarter of this year. Third-quarter Carl-Henric Svanberg, president and revenue increased 22.5 percent year-on- CEO, Ericsson, said, “The combined year to $1.17 billion, mainly due to robust strengths of both companies will create performance by its Internet, mobile, and significant value for customers and multimedia sectors. shareholders and exciting opportunities for For the first nine months to employees. The pace of IP deployment is September, Telekom’s net profit fell to $397 accelerating as operators move to all-IP million year-on-year from $440 million. converged networks, in which quality of Revenue increased 18 percent year-on-year service requires increasingly intelligent to $3.31 billion during this period. The routers with higher capacity.” company’s cellular mobile subscribers fell to 7.39 million in Q3, from 7.6 million in Q2. Moscow’s Altimo to invest in Vietnam Moscow’s Altimo plans to invest in Maxis Telecommunications reports 28 Vietnam and further expand to Southeast percent increase in third-quarter net Asia in the future. According to Altimo’s profit senior vice president, Roger de Bazelaire, Malaysia’s top mobile-phone the company has already invested around company in terms of subscribers, Maxis $30 billion in emerging telecom markets Communications, has posted a 28 percent across the globe. Further, it plans to acquire rise in net profit for the third quarter. The minor stakes in local mobile-phone operators firm’s net profit for the period ending and provide technological expertise to them. September 30 rose year-on-year from Altimo will be setting up an office in Vietnam $107.6 million to $140 million. The revenue in November. increased 25 percent to $547.2 million, as its Indian Aircel unit contributed $68.6 million Hong Kong’s telecoms regulator OFTA (12.5 percent) to the group revenue. grants EFTNS license to Tricom Asia Domestic business contributed 87 percent Hong Kong-based telecom regulator of the revenue for Maxis. It added 388,000 OFTA has granted an External Fixed local users in the period, reaching a total of Telecommunications Network Services 8.86 million subscribers, increasing from (EFTNS) license to Tricom Asia, enabling it 8.47 million in Q2. to operate telecom services through VN-HK, its 1,050km undersea fiber-optic network, FINANCING which links Hong Kong and Vietnam. Since China Telecom won a license in 2005, this CoComment gets new investor is the lone EFTNS license in Hong Kong. Japanese venture capital company Tricom Asia is planning to invest in telecom Netage Capital Partners Inc. is to invest in solutions in the emerging markets in Asia- the new Web service start-up company

12 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 coComment. This week Netage formally Redfern raises $7 million venture capital acquired a 40 percent share in the company financing at a cost of US$1.5 million. Redfern Integrated Optics Inc. (RIO), coComment started out in February a developer and manufacturer of low-cost, 2006 as a Web 2.0 service launched by high-performance optical transmitters for Swisscom Innovations as part of a telecommunications, data transmission, and development project. other markets, announced that it has The service enables comments secured an additional $7 million from TMT posted on the Internet — for example, in Ventures, Tallwood Venture Capital, and blogs — to be managed simply and Jolimont Capital. In connection with the new transparently. equity financing, Teresa Engelhard of Anyone who places comments onto Jolimont Capital joined RIO’s board of any of the numerous Internet blogs, photo directors. Web sites, or news sites quickly loses track “We have proven the value of their postings. proposition of our silicon integrated Thanks to coComment, users can photonics products by delivering low-cost, now manage their own comments simply long-reach, high data rate communications and transparently. And if others join in the optics in small form factors, with very low- discussion, the posters are kept informed. If power dissipation and unparalleled users place comments on other Web sites, wavelength stability — across industrial they can display them very easily in their own temperature range,” said Radu Barsan, blogs. president and CEO of RIO. “RIO has made coComment started out in February substantial progress over the past fiscal year, 2006 as a Swisscom Innovations project and has diversified its product portfolio and has received glowing reports on the Internet seen increased market traction with several scene. The number of comments being new design wins. This additional financing posted on the Internet is growing is a testimony to the confidence in RIO’s enormously. coComment thus belongs to commercial success.” one of the new Web 2.0 applications. It soon became evident that coComment had great Local CLSs now open to foreign potential as an independent start-up submarine cables company, prompting Swisscom to launch a The DoT has ordered that cable search for likely partners to develop its landing stations of Reliance activities further. Communications, Bharti, BSNL, and VSNL There was keen interest from Europe should be opened for access to international and the US, but in the end the offer by submarine cables that come into India. This Japan’s Netage was accepted. The venture will allow all players a fair and transparent capital company Netage Capital Partners, business space, and help to reduce headquartered in Tokyo, has extensive bandwidth rates. The access will also be Internet experience and is hugely successful available to domestic companies that may in the Asian market. A Japanese version of enter the undersea cable field. The coComment has already been launched by government has also announced that TRAI Netage and is well on the way to becoming will be the authority that will control the an established Web 2.0 service in the access charges for international bandwidth Japanese market. in a fair and balanced manner. Several large

© 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 13 telecom companies have been granted ILD customized video — requires an extensive licenses, and some others have applications local network overhaul in the United States. pending. The fully enriched experience and reliability The decision was taken after a written that the Internet should provide will require request to Communications and IT Minister bandwidth connectivity much higher than the Dayanidhi Maran, from Nipendra Mishra, capability of today’s copper facilities. Rusin chairman of TRAI, to set up procedures for believes, following the Korea and Japan infrastructure sharing. models, that broadband for an enriched online experience today starts minimally at MARKET INTELLIGENCE 100Mbps and within three years will increase to 200Mbps. Metropolitan fiber-optic leader foresees Rusin addressed three potential a bump in the road for online advertising bottlenecks based upon today’s network media and entertainment outlets architectures: Fiber to the Pedestal, or FTTP; Although Lehman Brothers is DOCSIS 3.0 Cable Modems; and reporting that print media advertising Broadband over Power Lines (BPL). “I know revenues are expected to fall by another 5 I’m going out on a limb in raising these percent on a national basis this year and points,” said Rusin, “There are underlying while the Internet has significantly increased technical beliefs, bordering on religion, that its advertising market share of online get in the way of delivering the quality of an expenditures (growing at a CAGR of 17.5 experience. Most users of the Internet do percent over the past five years), one not care much about our industry acronyms network provider is predicting a slow-down. or techno speak — they want a reliable and According to David G. Rusin, founder, rich experience predicated on enough president, and CEO of American Fiber reliable bandwidth to do so when, where and Systems Inc., this downturn will be primarily as needed.” due to bandwidth capacity limitations of Rusin foresees FTTP installations copper facilities. subject to attenuation signal loss of Rusin, a featured speaker at the bandwidth from the pedestal interface to the Executive Telecom Briefings Conference: copper that runs to a business or home. Internet Supply and Demand, The Effect of Attenuation loss means it may cost more to Video & New Internet Applications on regenerate signals and/or that the carrying Network Infrastructure Opportunities, held capacity of the signal is greatly reduced. recently at the Boston University School of Rusin also called into question the Business, highlighted factors affecting the viability of newly minted cable modems, demand for overall interactive media which have adopted the DOCSIS 3.0 experience. standards as a competitive alternative to According to Rusin, online media has fiber-to-the-home (FTTH) or fiber-to-the- the opportunity to be highly targeted, building implementations. The DOCSIS 3.0 personalized, and presence-integrated, stream of 120Mbps will not provide an unlike any other media form. However, Rusin enriched media experience for several warns before these synergistic benefits can reasons. First, the cable network, by design, be realized between buyers and sellers — is a shared network — it runs video, data, the ability to deliver a rich, integrated and voice applications concurrently over experience inclusive of fully interactive copper based coax across multiple end

14 © 2006 Information Gatekeepers Inc. . 320 Washington Ave, Brighton, MA 02135 USA . TEL 617-782-5033 . FAX 617-782-5735 points. The cable network DOCSIS Microsoft MSN and other content integrators counterpart — DSL, or digital subscriber line of the new media era recognize the — provides a better throughput opportunity limitations of the customer experience over because the copper is dedicated to a user copper while metropolitan fiber pipes enable and is not shared among other user end- the rich experience,” added Rusin, “I find points. However, in either case, when trying to regulate the Internet an absurdity. compared with optics or silicon-based It would be like regulating browsers or search spectrum, copper has limitations from a engines, such as Google, around search physics perspective. Reliability and cost of neutrality as well. An open, competitive unit delivery, when compared to fiber, are market will sort things out.” also limited. American Fiber Systems, a provider Rusin also discounts claims leading of metropolitan fiber-optic network to broadband over power lines as a mass infrastructure and wholesale transport market IP medium as having guaranteed services, is dedicated to enabling wireline limitations. Though power lines are and wireless carriers and large enterprises ubiquitous, they are also made of copper. achieve a competitive advantage from BPL trials conducted so far have been optical broadband communications inconclusive. A byproduct of these early trials technology. AFS has deployed high-capacity, has seen several early adopters exiting the high-bandwidth metropolitan fiber-optic technology. Anecdotally, the limited BPL cable in several cities, including Atlanta, results have a few BPL providers now over- Georgia; Boise, Idaho; Cleveland, Ohio; building the power grid with fiber. If BPL was Kansas City, Kansas/Missouri; Las Vegas, viable, why would you fiber the power grid? Nevada; Minneapolis/St. Paul, Minnesota, In addition, if you are going to fiber the power Nashville, Tennessee; Reno, Nevada; and grid, it would make more sense to offer Wi- Salt Lake City, Utah. They connect to a city’s Fi or WiMAX and wireless backhaul, which most important points of communications has a greater bandwidth capacity — albeit presence, including ILEC central offices and not close to fiber, but greater than power wire centers; CLEC POPs; Internet Service distribution copper. BPL is the ISDN of the Providers (ISP) and datacenter locations; new millennium — lots of promise Inter-exchange “carrier hotels;” wireless theoretically — a niche market at best. providers and cable company head ends; Rusin concluded that the underlying and Fortune 1000 companies. AFS has over inefficiencies of copper infrastructure are, in 500 capacity enabled on-net buildings. For his opinion, underlying the national debate more information, please visit on network neutrality. “Google, Yahoo!, www.americanfibersystems.com

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