The deal primarily extends $120 million in credit from Nortel to Net2000 toward the purchase of Nortel equipment with a repayment plan, said Net2000 spokeswoman Stephanie Nicoll. The exact terms of repayment to Nortel were withheld, and the other $50 million will be used as Net2000's operating capital, said Nicoll.
Under the terms of this exclusive provider contract, Net2000 will deploy Nortel DMS-500 switching systems, with an option to purchase AccessNode multimedia access vehicles for bandwidth management, and other peripheral equipment. Nortel will also supply staff responsible for network design, cutover, and operations support to help construct and maintain its network.
This three-year agreement will allow Net2000 to use Nortel's network switching systems as well as consulting support services to provide its business customers with expanded local, long distance, data, and Internet communications in a one-stop service.
"This is a major win for Net2000, and with our expertise and Nortel's state-of-the-art network, we can offer an expansive range of telecommunications services to businesses," said Net2000 president and CEO Charlie Thomas. "This agreement with Nortel also puts us well ahead of schedule for expanding throughout the region and entering new markets in the Northeast and mid-Atlantic."
Net2000's expansion in this region will pit it against the formidable presence of Bell Atlantic.
Service will first be started simultaneously in the Washington, D.C. and Baltimore areas in early 1999.
After two rounds of venture capital, and this contract with Nortel, Net2000 at $200 million, is funded through the year 2000, the company said. Net2000 also said it is ahead of its business plan, which includes opening additional offices from Raleigh to Boston, and doubling the number of employees by the end of 1999.
"We are pleased to have Nortel as our partner as we deploy state-of-the-art data and voice communications networks in the mid-Atlantic states and New England," said Brooke Coburn of The Carlyle Group, a private investment firm that led Net2000's second round of investment. "Nortel's significant commitment to Net2000, in a very challenging financing environment for [competitive local exchange carriers (CLEC)], validates the strength of the company's product offerings and management team."
Net2000 was founded in 1993, as a CLEC after the 1996 Telecommunications Act opened up the industry to local competition. The company offers a portfolio of local and long distance, voice, and data services in the Northeast and mid-Atlantic regions. Net2000 currently serves more than 2,500 business customers from Boston to Richmond.