Business News

Posted: 03/2001

Business News

VarTec, Lightyear to Merge
By Josh Long

VarTec Telecom Inc. (www.vartec.com), a
facilities-based telecommunications provider of local and long-distance services
to homes, and Lightyear Communications, a Louisville, Ky.-based ICP of voice and
data products to businesses, have announced they will merge.

Teaming with Dallas-based VarTec, Lightyear Communications Inc. (www.lightyearcom.com)
will combine its 700-member workforce and its national agent base to deliver
voice and data-related services in Europe, Mexico and the United States.
Executives also are working out a deal to route traffic to Canada.

According to the agreement, VarTec president A. Joe Mitchell Jr. will be
named president and CEO of the new company.

During a volatile economic era in which employees pray for job security after
a merger, the companies told PHONE+ that no job cuts are planned. In fact, they
say they will hire 150 people this year, and will need to hire an additional 200
people at a later date for their IT, finance, marketing and sales departments.

The companies say the combined organization will accommodate more than 6
million customers, serve 200,000-plus local telephone lines and generate
approximately $1.5 billion in 2001.

The merger, which is subject to regulatory and corporate approvals, is
scheduled to close during the second half of the year.

The privately-held organizations are not disclosing financial terms of the
agreement.

"I can tell you the combined enterprise will be profitable," says
Lightyear CFO Andy McKay.

A pioneer in dial-around service, VarTec has captured a strong play in the
local and long-distance residential market, while Lightyear, formally known as
UniDial Communications, has concentrated mostly on the business sector in the
convergence of voice, data and Internet services.

Lightyear plans to operate a packet-based backbone network in 24 metropolitan
regions throughout the nation. At press time, the network was activated in most
cities and was scheduled to be fully operational by the end of the month.

Lightyear will continue to offer services to its 600,000-plus customers under
its own brand. It also will maintain its center of operations in Louisville, Ky.

Executives of the two companies call the merger a "marriage that
incorporates distinct resources, including a large agent, direct marketing and
direct sales force, respective voice-based and packet-based facilities, and a
host of residential and business customers on the national and international
front."

Lightyear and VarTec reap "network synergies" by saving operating
and capital expenses through the merger, McKay says.

"They have a robust voice network which is busy at night due to their
customer base, and because we have predominantly business customers, their
network has capacity during the day, which is the busy time for our
customers," McKay adds.

VarTec also has a strong reputation in direct marketing, a robust voice
network targeting the residential market and an international presence in
England, Germany and Mexico.

McKay says VarTec’s flagship dial-around service increasingly has gained
market share among telecom titans AT&T Corp. (www.att.com)
and WorldCom Inc. (www.wcom.com).

In contrast, Lightyear distributes its content primarily through nearly 500
agents and a direct sales force. It manages a data network targeting U.S.
businesses.

The merger clearly "gives you a very very low-cost structure,"
McKay says. "You will not find a transaction where businesses are so
complementary."

England-based VarTec Telecom Europe, an owner of multiple customer service
centers and switch sites, provides dial-around long-distance service to
residences and small businesses in the United Kingdom. Last fall it expanded its
operations in Freiburg, Germany. VarTec also owns Choctaw Communications Inc., a
reseller of prepaid local dial tone in 20 states.

VarTec also is a large shareholder in Protel S.A. de C.V. (www.protel.com.mx),
a facilities-based provider that offers long distance, prepaid cards and
Internet-related services to residential and commercial customers in Mexico.

The merger will cause some key personnel changes. Among them, Lightyear’s
chairman and chief executive J. Sherman Henderson III will be named president of
the business services division. VarTec’s COO, Ron Hughes, will also function as
president of the consumer services division.

McKay has been named president of the local services division. Ray Atkinson,
VarTec co-founder and president of VarTec Telecom Properties, will become
president of international operations. Connie Mitchell, co-founder and president
of VarTec Telecom Properties, will now carry the title of executive vice
president of human resources. Lastly, Michael Hoffman will act as general
counsel for the combined organization.

Adds, Moves & Changes

ITXC Corp. (www.itxc.com), a global
provider of Internet voice services, has reorganized to support its growing
network, ITXC.net, and new e-calling services, which are made possible through
the company’s acquisition of eFusion Inc.

Eric Weiss, former VP and GM of the ITXC WWeXchange Service, the
wholesale phone-to-phone service, has been promoted to executive vice president.
Vice president of operations William Diaz reports to Weiss as does Ed
Hirschman, now vice president and general manager of WWeXchange Service.

Steve Ott now is responsible for global sales of WWeXchange and
e-calling services.

Tom Shoemaker, executive vice president of business development, will
serve as general manager of e-calling subscriber services. And Luis Machuca
continues to serve as executive vice president and general manager of e-calling
e-commerce services.

ITXC says it has eliminated the position of COO.

* QUALCOMM Inc. (www.qualcomm.com), a
leader in code division multiple access (CDMA) digital wireless technology, has
appointed Jeffrey K. Belk senior vice president of marketing. Belk will
be responsible for marketing and corporate communications worldwide.

The marketing executive previously served as senior vice president and
general manager of QUALCOMM’s Eudora products.

QUALCOMM also has named Peggy Johnson senior vice president and
general manager of the newly formed QUALCOMM Internet Services division.