Fonix To Acquire LecStar Telecom
SALT LAKE CITY, UT - Fonix(R) Corp. (OTC BB: FNIX) announced it has signed an agreement in principle to acquire all of the capital stock of LTEL Holdings Corp. Privately held LTEL has two wholly owned subsidiaries, LecStar Telecom Inc., an Atlanta-based competitive local exchange carrier, and its sister company, LecStar Datanet Inc., a provider of Internet services to business and residential customers. The stock and debt transaction will involve consideration valued at $33 million. The acquisition of LecStar is anticipated to significantly accelerate Fonix's growth strategy by providing a recurring revenue stream, a growing customer base and new marketing channels. LecStar's customer base -- which historically has been growing at an annual rate of 60 percent or better - provides a predictable revenue stream and reduces Fonix's cost of capital. LecStar's revenue grew from $4.9 million in 2001 to $9.7 million in 2002 and the company expects to report approximately $16 million in revenue for the year ending Dec. 31, 2003, and expects to be EBITDA positive for the fourth quarter. "Fonix's acquisition of LecStar holds tremendous promise for our company, our shareholders, our customers and our partners," said Roger D. Dudley, executive vice president and CFO of Fonix. "Fonix has a significant presence in the speech technology and solutions industry, serving the leaders in electronics manufacturing, software, automotive and telecommunications. This transaction significantly accelerates our ability to grow our licensed business by providing recurring revenues to fund continued efforts in sales, market channel expansion and product development, which are key growth drivers in the evolving speech technology and solution industry." LecStar expects to report approximately $16 million in revenue for the year ending Dec. 31, 2003. LecStar's customers offer a direct marketing and distribution channel for Fonix's speech technologies and solutions. This combination will give Fonix immediate access to LecStar's customer base, enabling Fonix to bundle its telephony and mobile/wireless speech interface solutions with LecStar's telecommunications services. In addition, LecStar's utility partnerships offer opportunities to expand Fonix's marketing channel with system integrators. "We are very excited about the added benefits and services that this transaction will make available to our customers," said W. Dale Smith, president and CEO of LecStar Telecom. "This combination will give Fonix immediate access to our growing customer base, enabling Fonix to bundle its speech products and services with our telecommunications services to offer robust speech solutions. Additionally, our utility partnerships offer further opportunity to market the vast array of speech technology solutions and services in the mobile phone and mobile learning markets to an even broader customer base. Our customers will continue to receive the same high level of service and support and will benefit from proven and ready-to-use speech solutions for mass market systems and devices." The closing of the acquisition is subject to usual and customary conditions for a transaction of this size and type, including satisfactory completion of due diligence and negotiation and execution of definitive agreements. While there can be no assurance that Fonix will be able to complete this acquisition, Fonix anticipates that it will close the purchase by Dec. 31, 2003.