NexHorizon Communications (OTCBB: NXHZ) is a cable service provider focused on delivering high quality digital services, faster internet, and state-of-the-art IP voice services. NXHZ is expanding its brand image and service mix by providing superior customer service and reliable technical support. NXHZ is also expanding its footprint and subscriber base through strategic acquisitions that increase market share and reduce service and marketing expense.
Earlier this year, NXHZ acquired Champion Cable and Sunrise Television Networks, which provides a subscriber base of 1,000 homes and annual revenue of $300,000.
With three cable systems identified for acquisitions, NXHZ is in position to begin delivering true “triple-play” service to more than 48,000 subscribers. In telecommunications, the triple play service is a marketing term for the provisioning of the two broadband services, high-speed Internet access and television, and one narrowband service, telephone, over a single broadband connection. Triple Play focuses on a combined business model rather than solving technical issues or a common standard.
Chula Vista and National City
Located in the San Diego metro market, Chula Vista-National City currently services 3,400 subscribers with annual revenues of $1.7 million. NXHZ entered into a Letter of Intent to acquire this provider in July 2007 and is in the process of upgrading the current analog infrastructure to digital, which includes implementation of various technologies that will provide expanded bandwidth capabilities to support triple play services. Chula Vista Cable and National City Cable are currently beta testing digital phone services and have begun the work to increase its bandwidth capacity. In our opinion, NXHZ investors could see huge profits as the company builds its fiber to the home network.
mstar
Located in the Salt Lake City metro market, mstar currently services 20,000 subscribers with annual revenues of $8.5 million. Mstar is Utah’s premier provider of premium triple-play services across a world-class fiber optic network. mstar is Utah’s largest and fastest-growing fiber-optic service provider of ultra high-speed Internet, telephone, television and related communications services. Its fiber-optic services, offer the fastest connection in the world at 15 Mbps, more than four times faster than cable, and the industry’s highest available symmetrical bandwidth. NXHZ is currently negotiating to enter into a Letter of Intent to acquire mstar.
Galaxy Cable
Galaxy Cable operates in nine US states and services more than 23,500 subscribers with annual revenues of $16.9 million. NXHZ entered into a Letter of Intent to acquire Galaxy Cable in May 2007. If consummated, the Galaxy transaction could potentially add more than $16 million in revenue and a call center capable of handling 500,000 customers.
Post Acquisition Plans
Subsequent to the three acquisitions, NXHZ plans to consolidate and upgrade each market’s network infrastructure and technology which will result in increased bandwidth, improved reliability and expanded “triple-play” services supported by first class customer support.
To support its voice service, NXHZ is partnering with Momentum Telecom, a leading provider of private label digital voice service to operators throughout the US. The addition of digital voice and other IP services, will offer a platform to expand its revenue up to three times as currently generated by its targeted cable system providers; Chula Vista-National City, mstar, and Galaxy. At this juncture, NXHZ should be able to reward shareholders by utilizing Economies of Scale, which was pioneered many years ago by Andrew Carnegie. By combining Chula Vista-National City, mstar, and Galaxy, NXHZ should be able to eliminate cost s by reducing excess distribution points and continuing to develop strategic supplier relationships. Additional growth will be fueled by aggressive expansion as NXHZ expands its sales force and customer service support. Additionally, management plans to upgrade the infrastructure of the combined companies to support new services.
The Cable Television Industry
Cable television is a system of providing television to consumers via radio frequency signals transmitted to televisions through fixed optical fibers or coaxial cables as opposed to the over-the-air method used in traditional television broadcasting (via radio waves) in which a television antenna is required. FM radio programming, high-speed Internet, telephony and similar non television services may also be provided.
Coaxial cables are capable of bi-directional carriage of signals as well as the transmission of large amounts of data. Cable television signals use only a portion of the bandwidth available over coaxial lines, which leaves space for digital services such as broadband internet and cable telephony.
Broadband internet is achieved over coaxial cable by using cable modems to convert the network data into a type of digital signal that can be transferred over coaxial cable. One problem with some cable systems is the older amplifiers placed along the cable routes are unidirectional. In order to upload data the customer would need to use an analog modem to provide an upstream connection. This limited the upstream speed to 31.2k and prevented the always-on convenience broadband internet typically provides. Companies like NXHZ are upgrading their equipment to allow for bi-directional signals, thus allowing for greater upload speed and always-on convenience.
In North America and Europe many cable operators have already introduced cable telephone service, which operates just like existing fixed line operators. This service involves installing a special telephone interface at the customer's premises that converts the analog signals from the customer's in-home wiring into a digital signal, which is then sent on the local loop to the company's switching center. The biggest advantage to digital cable telephone service is similar to the advantage of digital cable TV, namely that data can be compressed, resulting in less bandwidth used than dedicated analog circuit-switched service. Other advantages include better voice quality and integration to a VoIP network providing cheap or unlimited long distance.
In 2004 in the United States, the traditional cable television providers and traditional telecommunication companies increasingly compete in providing voice, video and data services to residences. The combination of TV, telephone and Internet access is commonly called triple play regardless of whether CATV or Telco's offer it.
In our opinion, NXHZ is in a position to capitalize on the sea of changes in the Cable Industry. As a result, we believe shareholders will see tremendous returns.
Summary
NXHZ currently has a strategic relationship with top VoIP technology provider and an aggressive goal to reach 250k subscribers within 5 years.
CEO, Calvin Smiley, has over 30 Years of broadcast and cable TV experience, having held various executive positions with Tele-Communications, Inc., (now Comcast) and Warner-AMEX. Director, Greg Liptak, brings over 40 years in the same industry.
NXHZ has already completed two acquisitions in first half of 2007. With its significant pipeline of new acquisition opportunities, NXHZ could potentially realize revenues of more than $27 million and EBITDA of close to $8.7 million.
Currently, NXHZ has two letter of intents to acquire more than 26,900 subscribers with an additional 23,500 to follow.
Once again, it is our opinion that investors who get in NexHorizon Communications at these levels, will see tremendous profits.
