Investment Proposal

                              for

HAITI FIBER NETWORK COMPANY



      Executive Summary
           ...
Executive Summary
                                                                                                     Jan...
Executive Summary
                                                                                          January 2007
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Executive Summary
                                                                                                   Janua...
Executive Summary
                                                                                             January 200...
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Hfn Executive Summary

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Caribbean Fiber Optic Project to Haiti

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Hfn Executive Summary

  1. 1. Investment Proposal for HAITI FIBER NETWORK COMPANY Executive Summary January 2007 Page 1 of 5 Copyright 2007 Telequity Group LLC. All rights reserved. 442 Route 202-206 North #276, Bedminster, New Jersey 07921 Web: www.telequitygroup.com
  2. 2. Executive Summary January 2007 Introduction The Haiti Fiber Network Company (“the Company”) will be formed in the United States with a wholly-owned subsidiary in Haiti for the purpose of becoming the primary provider of fiber network-based international and domestic telecommunications services, including broadband Internet and multimedia services for the impoverished, underdeveloped, and underserved country of Haiti. Today, virtually 100% of Haiti’s international traffic is transported to the United States using very expensive, low-bandwidth microwave connections through the Dominican Republic or directly via satellite with all of Haiti’s domestic traffic being transported using low-bandwidth microwave or other types of wireless connectivity. In early 2006, the Bahamas domestic cable project was completed by the government-owned telephone company of the Bahamas at a cost over $60M, including a cable segment from Bahamas to Haiti. However, bandwidth from the Bahamas to Miami’s NAP of the Americas in the United States (the primary traffic hub for the region) is scarce and expensive, creating a long-term competitive disadvantage for the Bahamas route from Haiti. In addition, a domestic fiber distribution network infrastructure, necessary to support high-bandwidth users of broadband Internet and multimedia services, does not exist in Haiti. In response to these infrastructure deficiencies, the Company plans to develop, operate, and maintain the critical international and domestic telecommunications network infrastructure necessary to support Haiti’s existing voice and future broadband Internet, multimedia, and data traffic growth. With a population exceeding 8 million and a line penetration less than 2%, the Company will be uniquely positioned to benefit from the growth of all telecommunications services in Haiti as it provides fiber backbone network services to all of Haiti’s telecommunications services providers. The Company’s network plans are shown in the maps provided below: The network will be constructed by Tyco Telecom under a turn-key, fixed-price supply contract that was awarded after an extensive competitive tender process. Tyco has implemented more than 350,000 km of undersea systems in many of the world’s largest and most advanced undersea fiber optic networks connecting the Americas, Europe, and Asia. Construction of the network can be completed within 10 months of down-payment to Tyco. Once complete, the Company will be in a position to provide more competitive, reliable, and technically superior wholesale connectivity solutions than currently available in Haiti. During construction, the Company will begin sales and marketing activities in order to maximize revenue generation from the day that the network is ready for service. As a result, the Company expects to achieve profitability within 12 months of network completion. Longer term, the Company believes that improved telecommunications infrastructure in Haiti will help to attract investments in many different industries in Haiti, including financial services, information technology, medical, heath care, manufacturing, tourism, etc., which will lead to exceptional growth in demand for all telecommunications services in Haiti. Based upon the competitive advantages provided by a superior high-bandwidth fiber optic network, the Company is confident that it can capture and maintain at least 50% of the wholesale market for international and domestic network transmission services in Haiti. The Company’s revenue growth and Page 2 of 5 Copyright 2006 Telequity Group LLC. All rights reserved. 442 Route 202-206 North #276, Bedminster, New Jersey 07921 Web: www.telequitygroup.com
  3. 3. Executive Summary January 2007 gross income projections are based on a conservative annual market growth rate of 40% per year, as shown in the 5-year operations forecast shown below: After the Company has achieved its primary objectives, many lucrative exit strategies will become possible, including, but not limited to, the following: (1) Leveraging the Company’s assets to purchase interest in one or more of the existing Haitian operators (2) Selling the Company to a larger, global telecommunications company (3) Initiating a public offering in order to secure additional capital for (i) expansion of the network, (ii) entry into the retail market, or (iii) strategic acquisitions The Market Opportunity The Company has been provided a first-come, first-served opportunity by Trans-Caribbean Cable Company (“TCCC”), the developer and coordinator of the Trans-Caribbean Cable Network (“TCCN”) undersea cable project, which creates the possibility for the Company to obtain exclusive ownership and control of the TCCN Haiti landing point with direct fiber connectivity to the United States (see Exhibit A, the “TCCN Proposal to Haiti Fiber Network Company”) at a maximum investment cost of $35M under the supply contract with Tyco, providing the Company with an initial international capacity inventory of 10 Gbps (10,000 Mbps). When this capital cost is amortized over 5 years and network utilization is assumed to average only 10% during such time (1,000 Mbps), then the Company’s average cost per Mbps (including annual maintenance) will be approximately $690 per Mbps per month. The current market rate for satellite or microwave connectivity exceeds $6,000 per Mbps per month. The Company plans to implement the domestic network at an additional cost of $45M. With the domestic network, the Company will extend fiber network connectivity to seven additional cities in Haiti and is expected to increase average network utilization from 10% (1,000 Mbps) to at least 25% (2,500 Mbps). With this increased utilization, the Company’s average cost will decrease to approximately $582 per Mbps per month. Network Development & Services TCCN, including some 66 operators in the Caribbean region, has completed the necessary feasibility studies, licensing, and construction contracts to build Haiti’s first undersea fiber optic cable providing direct connectivity to the United States. However, the 10-15 participants from Haiti have so far been unable to reach mutual agreement on the funding for the TCCN landing in Haiti. Therefore, the Company’s initial strategy and focus is as follows: (1) To secure first-round equity funding and place $7.2M (20% of $36M) into a TCCN escrow account to secure exclusive control of the TCCN landing in Haiti (from the other participants). (2) Provide reasonable opportunity for additional TCCN countries to achieve escrow funding while the Company secures second-round equity funding and financing to meet the Company’s capital requirements in accordance with the business plan. Page 3 of 5 Copyright 2006 Telequity Group LLC. All rights reserved. 442 Route 202-206 North #276, Bedminster, New Jersey 07921 Web: www.telequitygroup.com
  4. 4. Executive Summary January 2007 Without committing to spend any of the first-round equity funding, the Company will gain full control of the TCCN landing in Haiti and Haiti’s first direct fiber optic connection to the United States. When combined with its wholly-owned domestic backbone network, the Company’s fiber network will provide direct state-of- the-art fiber optic connectivity from and between eight of Haiti’s largest cities to the United States. Wholesale network services to all of Haiti’s existing operators will be provided from these eight fiber backbone nodes. Sales & Marketing Haiti has existing fixed telecommunications services providers (including a few cable operators and the government owned incumbent telephone company), at least three major wireless operators, and dozens of other Internet, VOIP, or other types of services providers. Therefore, the Company believes that the demand for wholesale fiber solutions is robust and will easily support the business model as long as the Company avoids entry into the retail market against its wholesale customers. The telecommunications traffic (including voice, data, and Internet) from Haiti to the United States currently exceeds 2 Gbps (2,000 Mbps), costing over $6,000 per Mbps per month (or $144M annually) on average for Haiti’s operators to lease from existing satellite and microwave providers in order to support their current operations. The Company believes it can capture 50% of this traffic by offering a much better service at a lower price. The Company’s business model conservatively assumes pricing starting at just $3,000 per Mbps per month. In practice, the Company expects to be able to price its network services very near to the current market rates because the Company will enjoy significant qualitative competitive advantages when compared to other existing options, which include: (1) Satellite – Satellite transmission is nearly unacceptable for broadband services due to consistently high network latency (delay) of 500 milliseconds or more and intermittent interruptions due to changes in atmospheric conditions (weather). By comparison, the Company’s fiber network will offer network latency of 50 milliseconds or less as well as improved security and higher capacity potential. (2) Microwave (MW)/ RF – Microwave and RF (radio frequency) options in Haiti provide connectivity to existing fiber networks in the Dominican Republic which in turn provide connections to the United States. MW transmission is subject to signal blockage and changes in atmospheric conditions (weather) that can interrupt service. By comparison, the Company’s fiber network will offer much higher reliability as well as improved security and higher capacity potential. (3) Bahamas Fiber – Although the Bahamas Fiber has been in service for more than 6 months now, no capacity sales on the system have been reported. In order for the Bahamas Fiber to be commercially successful, the Company believes that a number of problems will need to be resolved by the Bahamas Telephone Company (BTC), many of which are not within their control. As mentioned, BTC must purchase third party bandwidth between the Bahamas and the Miami NAP (or an equivalent network peering point) for use in the Haitian market from one of two sources, either AT&T (the monopoly backhaul provider for the BAHAMAS-II cable) or New World’s ARCOS, which is owned by the same parent as Cable Bahamas (their primary competitor in the Bahamas). Additionally, the Bahamas Fiber connects into a facility owned and operated by Teleco, the telephone company owned by the government of Haiti. It appears that the project was completed without any agreements requiring Teleco to use, sell, or provide network access to others. By comparison, the Company will have full commercial and physical control of its network from the Miami NAP up to and including each landing station in Haiti. The Company’s sales and marketing materials will be designed to highlight these advantages. Financial Plan The Company is targeting $90M for its total initial capitalization in order to build its network assets and to support at least 2 years of operational costs after the completion of the network. The Company is currently planning to obtain $10M from first-round investors, $40M from second-round investors, and $40M from lenders (long-term debt) in order to achieve the initial capitalization target. In order for the Company to secure exclusive ownership and control of the TCCN Haiti landing point before any other potential competitor, the Company needs to complete the first-round by the end of 2006 or sooner, if possible. Page 4 of 5 Copyright 2006 Telequity Group LLC. All rights reserved. 442 Route 202-206 North #276, Bedminster, New Jersey 07921 Web: www.telequitygroup.com
  5. 5. Executive Summary January 2007 After closing the first-round, the Company will place $7.2M into a TCCN escrow account (to secure full control of the Miami-Haiti route in TCCN) and then hold the balance as an operational reserve on deposit in a Company account in the United States. The Company will use less than $500k for promoting and closing the second-round and/or debt financing, as necessary. Exit Strategy Many lucrative exit strategies will become possible to the Company after achieving its short term goals. The exit options include the following: (1) Leveraging the Company’s assets to purchase interest in one or more of the existing Haitian telecommunications service providers (2) Selling the Company to a large global telecommunications company (3) Initiating a public offering in order to secure additional capital for (i) expansion of the network, (ii) entry into the retail market, or (iii) strategic acquisitions Management Team The Company has contracted the very experienced and highly qualified personnel of Telequity Group (TG) to serve in key executive positions for the successful completion of its immediate objectives. TG has more than 50 years of combined expertise in undersea cable planning, construction, operations and maintenance from many systems around the world, including AC-1, Africa-1, Antillas-1, Americas-II, APCN, APCN2, ARCOS-1, Bahamas-II, BUS-1, China-US, CIOS/TEFKROS/ CADMOS, Columbus-2, FLAG, HAW-5, Japan-US, MAYA-1, PAC RIM EAST, PAN AM, QCC, SEA-ME-WE-2, SEA-ME-WE-3, Taino-Carib, TAT- 10, TAT-11, TAT-12/13, TAT-14, TCS-1, TPC-5, Unisur, and others. The biographies of these key TG personnel are provided below: Name Biography Brian Crawford, With 14 years in the undersea cable industry, Mr. Crawford has worked on more than 15 different undersea cable projects President around the world, gaining experience in all aspects of undersea cable network design, planning, construction, operations and maintenance. Formerly with AT&T Submarine Systems (now Tyco Telecom), AT&T Communications, Pacific Gateway Exchange, and New World Network, Mr. Crawford now serves as the President of Telequity Group. Jeff Fleisher, With 13 years in telecom and 8 years in the undersea cable industry, Mr. Fleisher has also worked on more than 15 undersea Director of Operations cable projects around the world, specializing in undersea cable licensing, permitting, construction, operations and maintenance. Formerly with AT&T Submarine Systems (becoming Tyco Telecom), Lucent Technologies, and New World Network, Mr. Fleisher now serves as a Director of Operations for Telequity Group. David Crawford, With over 10 years of financial and managerial experience, Mr. David Crawford helped to structure financing for SEACN, Director of Finance CHINA-US, AMERICAS-II, and ARCOS among others while he was Senior Corporate Finance Manager at Tyco Telecom. He was also instrumental in securing the largest ever telecom Preliminary Project Letter (PPL) from EXIM Bank. Prior to Tyco, Mr. Crawford worked at AT&T in the Central Billing Party Department for NAZ/HAZ cable maintenance agreements. With vast experience ranging from Escrow Agreements, Letters of Credit, Export Agency billing documents, and the management of over $1 billion in Advanced Payment Bonds, Mr. Crawford brings valuable financial expertise to serve as the Director of Finance for Telequity Group. Neil Habig, With 14 years in the undersea cable industry, Mr. Habig has led the development and construction of numerous major cable Director of Project systems in all regions of the world including the Caribbean. Formerly with AT&T Submarine Systems (becoming Tyco Management Telecom) and then more recently as a consultant in the telecom and energy fields, Mr. Habig now serves as the Directo of r Project Management for Telequity Group. Conclusion The Company believes it is poised to become the primary provider of fiber network-based international and domestic telecommunications services, including broadband Internet and multimedia services for the impoverished, underdeveloped, and underserved country of Haiti. The Company’s specialized management team is uniquely positioned to bring this critical infrastructure project to realization, providing the investor, interested in supporting the growth and betterment of Haiti, a very attractive and exciting opportunity. Due to the time sensitivity related to securing exclusive control of the international network, immediate action is recommended. Page 5 of 5 Copyright 2006 Telequity Group LLC. All rights reserved. 442 Route 202-206 North #276, Bedminster, New Jersey 07921 Web: www.telequitygroup.com

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