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Covad Signs Agreement to Acquire GoBeam to Accelerate VoIP Launch

[March 05, 2004]

Covad Signs Agreement to Acquire GoBeam to Accelerate VoIP Launch

Covad Communications Group, Inc. (OTCBB: COVD), a leading national broadband service provider of high-speed Internet and network access, today announced it has signed an agreement to acquire GoBeam Inc., a privately-owned provider of Voice over Internet Protocol (VoIP) services.

Covad will acquire GoBeam, including its assets and intellectual property in a transaction valued at $48 million that is expected to close in May of this year, subject to customary closing conditions. GoBeam’s stockholders will receive Covad shares in exchange for their GoBeam shares. GoBeam, which is based is Pleasanton, California, currently has more than 13,000 VoIP stations (telephones) serving business customers throughout California and in the Chicago, Illinois area.

VoIP represents a dramatic transformation in telecommunications that leverages the power of the Internet to enable next generation communications capabilities. It uses a broadband Internet connection to carry local and long distance voice calls instead of the public switched telephone network. According to a report from research firm Stratecast Partners, by 2007 the U.S. VoIP market is forecast to grow to more than five million subscribers, a five-fold increase over 2002 levels. The Internet Protocol-PBX market, which has just under 100,000 lines today, is expected to grow to more than 1.7 million lines by 2007, according to Forrester Research.

“Our acquisition of GoBeam not only accelerates Covad’s entry into the growing VoIP market, but it also is a major step in transforming Covad from a broadband company into an integrated voice and data communications provider,” said Charles Hoffman, Covad president and chief executive officer. “By combining Covad’s nationwide broadband network with GoBeam’s market-leading VoIP services we expect to greatly accelerate the national availability of VoIP and communications services bundles eventually reaching more than 100 of the top Metropolitan Statistical Areas (MSA) in 35 states.”

“We welcome the opportunity to partner with Covad,” said GoBeam CEO Bill Jarvis. “The combination of GoBeam’s managed business communication applications with Covad’s nationwide broadband network and operating systems will enable us to provide end-to-end business communications solutions to customers across the country.”

GoBeam will retain its own brand and continue to operate its services until mid-year 2004 when the transition to Covad has been completed. Founded in 1999, GoBeam was created to extend and deploy next generation communications services for small and medium-size businesses by leveraging extensive experience in end-to-end IP switching and transmission technology and a highly advanced software-based development platform. GoBeam received a 2003 Editor’s Choice Award from Network Computing and Network Magazine’s 2002 Product of the Year award.

"The acquisition of GoBeam expedites Covad's entry into the VoIP market and adds an important new revenue stream and service package for Covad. In addition, after four years of delivering VoIP to the enterprise, GoBeam's technical and marketplace savvy will give Covad a distinct advantage." said William Stofega, senior telecommunications analyst at IDC. "Covad's national network is a perfect fit for GoBeam's distribution model and enables Covad to transition from a broadband provider to a national integrated communications provider."

GoBeam currently offers a comprehensive suite of business VoIP solutions to accommodate varying customers’ needs. At the center of the GoBeam solution is a full-feature hosted PBX solution that offers advanced PBX capabilities without the need to install expensive PBX hardware at the customer location. In addition, each user gets a unique phone number and an associated GoBeam Dashboard to manage incoming and outgoing phone calls through a computer.

The GoBeam Dashboard allows users to consolidate their multiple phone numbers with a single personal telephone number so callers reach them wherever they are. A personal virtual fax number handles all incoming faxes. The unified visual mailbox conveniently manages voicemail and faxes just like e-mail. Robust call logs and integration with Microsoft Outlook allow users to make and return calls with just a mouse click. Web collaboration and voice conferencing are easy to set up and use.

Jarvis added: “It is this unprecedented availability, control and ease of use of advanced communications capabilities that lead to tremendous improvements in business productivity that has helped so many GoBeam users become raving fans of the GoBeam service.”

Covad plans to eventually offer VoIP to the consumer market through its wholesale partners and direct sales.

This accelerated roll out of VoIP services will require additional investment, and Covad is currently evaluating what impact this will have on the company’s previous expectation to be cash-flow positive by mid-year 2004.

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