Warwick Valley Telephone Company purchases Alteva of Philadelphia

Deal is expected to increase consolidated revenues by 30 percent annually WARWICK - WVT Communications/Warwick Valley Telephone Company has announced that it will purchase the Philadelphia-based firm, Alteva LLC, for $17 million in cash and stock by the close of the third quarter of 2011. The transaction is subject to regulatory approvals. It will be paid for with approximately $11 million from cash on-hand, $4 million worth of common stock and $2 million in performance-based payments over the next 1.5 years. Alteva is a cloud-based Unified Communications (UC) solutions provider and North America’s largest enterprise hosted Voice over Internet Protocol (VoIP) provider. Unified communications bridges the gap between VoIP and other computer-related communication technologies. Following the closing, WVT Communications will integrate its existing competitive local exchange carrier business, USA Datanet, with the operations of Alteva. Company officials said this will allow the company to capitalize on the growth that both service providers had been experiencing in the fast growing market for Unified Communications and hosted applications for business and enterprise customers. Revenues grow by 30 percent It is anticipated that the Alteva acquisition will increase WVT’s consolidated revenues by approximately 30 percent on an annual basis, with an even greater percentage improvement in operating cash flow growth, before consideration of cost savings associated with expected integration synergies and the expected increase in business volume. On Dec. 31, 2010, the company reported total annual operating revenues of $24,426,000. Duane W. Albro, president and CEO of Warwick Valley Telephone Company, called the acquisition “extraordinary” because it will “contribute to our strength and momentum in the marketplace.” He also said the purchase will have beneficial impacts on the company’s workforce, the services delivered to customers and to deliver shareholders. “We believe we have found a strong partner in Alteva, a fast-growing UC service provider which has a complementary business, a well-regarded brand and shared values that will both benefit from and contribute to WVT’s future success,” the president and CEO added. Albro explained that the acquisition of Alteva LLC implements WVT Communications’ three key strategies, namely strengthening the company’s Competitive Local Exchange Carrier platform, leveraging its legacy incumbent local exchange carrier (ILEC) business to enhance its competitive position, and improving upon WVT’s financial performance by scaling and growing overall operations. “WVT,” he said, “will be well-positioned for future growth in its revenues, profitability and market share in one of the communications industry’s fastest growing segments. This acquisition brings together complementary services and allows us to cover all market segments.” What others say The acquisition is a significant investment by an independent telecommunications company like WVT, according to a comment posted by Jesse Ward on the National Telecommunications Cooperative Association’s Web site (www.ntca.org). “As landline revenues dwindle,” Ward wrote, “WVCT is seeking to gain more revenue from its enterprise side of the house—and cloud services are one of the fastest growing segments within the business market.” The National Telecommunications Cooperative is non-profit association representing more than 570 small and rural telephone cooperatives and commercial companies. Bernie Arnason, the managing editor of Telecompetitor, a leading interactive blog for the evolving competitive telecom landscape, agrees. “Like most telcos who embark on the cloud services strategy, revenue diversification is a key motivating factor,” Arnason wrote on his blog (www.telecompetitor.com). “In 2010, WVT counted 70 percent of its revenue from traditional telco revenues like local and long distance voice services, among other products. That revenue source is in decline, so the acquisition of Alteva hopes to help grow the other 30 percent. Much larger carriers, including TDS and Windstream, are very active with this strategy, making significant investments in their own cloud based assets. Essential information Warwick Valley Telephone (NASDAQ:WWVY), 47 Main St., is a full service telecommunications company serving southern Orange County, and part of central New York and northwestern New Jersey. WVT has approximately 26K access lines and 100 employees. Last week Duane W. Albro, president and CEO, discussed the acquisition and its growth strategies during a conference call for investors and other interested parties. A replay of this conference call will be available until midnight Sunday, Aug. 14, by dialing 888-203-1112 (toll free) and providing access code: 8804043. What the terms mean Here’s an explanation of terms and acronyms, thanks to WVT Communications Marketing Manager Jean M. Beattie: CLEC: Competitive local exchange provider. A company that competes with other, already established carriers (generally the incumbent local exchange carrier (ILEC)). ILEC: Incumbent local exchange carrier. ILEC’s are the regulated franchises that are responsible for local telephone exchange services in a specified geographic area. UC: Unified communications. Unified communications is a new technological architecture whereby communication tools are integrated so that both businesses and individuals can manage all their communications in one entity instead of separately. In short, unified communications bridges the gap between Voice over Internet Protocol (VoIP) and other computer related communication technologies. Cloud Computing: Housing servers in another location and/or having some other company house them for you. If you use Yahoo or Hotmail then you have used cloud computing. Cloud computing is the use of a utility rather than a product, much like paying for the use of other utilities, such as water and electricity. This takes the burden off your company to create a new and complicated infrastructure for your phone and computing systems with hardware and software, and instead gives you access to one that already exists on the Web.