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Axia receives SuperNet payments relating to Bell West contract dispute

Axia NetMedia Corp. announced today it had received a payment of $18.8 million in accordance with a March 18 reorga...

May 13, 2003  

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Axia NetMedia Corp. announced today it had received a payment of $18.8 million in accordance with a March 18 reorganization between Axia, the government of Alberta and Bell West.

Pursuant to this agreement, Alberta’s Department of Innovation and Science reviews and determines the appropriateness of costs Axia incurred under its construction subcontract that Bell West had refused to pay, the company said.

“The remaining subcontract work, that will now not be done by Axia, was less strategically important to us,” said Art Price, Chairman of Axia. “We have either retained or completed the subcontract responsibilities that are ritical to the success of the project: the network design, purchase of third-party telecom assets, the completion of the central operating systems, and the design, supply and provisioning of high-end electronics.

“Bell’s actions damaged Axia’s operations and became threatening to Axia’s survival. Consequently, Axia’s senior executive has been entirely focused on keeping the company stable and finding a solution.”

Axia’s remaining main business relationship with Bell is a 10-year service agreement whereby Bell is expected to provide telecom services to Axia.

“In this respect,” Mr. Price said, “I believe that Axia potentially could be Bell West’s largest private sector customer and that we could mutually benefit from Bell Canada’s customer-focused reorganization announced last week by its CEO.”

In January, Axia received notification from Bell West, the prime contractor, that it was terminating the construction subcontract. Axia immediately disputed that Bell West had any grounds for such actions. Axia further stated that the subcontract could not be terminated in this fashion as a matter of law and accordingly, the subcontract continued until it was determined otherwise by a solution to the dispute.

Axia’s 10-year Alberta SuperNet operations and management agreement with the government was not affected by the March 18 agreement.

In earlier reports, Axia estimated that its revenues from construction and operation during the construction period would be $210 million to $240 million over three years beginning in fiscal 2002. Axia would earn a fee of approximately $10 million for construction services.

Up to the end of this past third quarter, Axia had completed construction work that generated $75 million in revenue, earning $4 million of its fees.

The work completed included the OSS/BSS central operating system, the negotiation and purchase of existing telecom assets from competitors to Bell, and the establishment of network design and implementation standards.

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