Axia Interactive Progress Report 2011

INTERACTIVE
PROGRESS
REPORT 2011
Highlights

Dear Shareholders,

Fiscal year 2011 was an exciting year for Axia as we continued to deliver on our goal of being the dominant provider of fibre infrastructure in the regions where we operate. Download the full Letter to Shareholders.

DOWNLOAD THE FULL
PROGRESS REPORT 2011 (1.5 MBs)

DOWNLOAD MD&A, Financials and Notes (759 KBs)

Axia at a Glance

AXIA's Priorities Selected Financial Highlights

Axia's Priorities

Drive the use of
our infrastructure

Extend the reach of
our networks

Selectively evaluate entry
into other markets

Our current operations span the globe with capital invested in our networks, or scheduled to be invested in our networks by Axia and our partners totalling $2.0B. We have more than 200 Retail Service Providers (RSPs) as direct customers, in five networks globally and almost 30,000 km of fibre.

Selected Financial Highlights

As each of our Next Generation Networks (NGNs) progresses through the build phase into active operations, we remain on track with our long-term plans to deliver predictable and sustainable earnings growth.The company is completing a period of heavy investment in Europe and Asia while maintaining a conservative balance sheet, which leaves the business well positioned going forward.

	2011	2010
Consolidated Revenue	$78.2M	$68.5M
Gross Proﬁt	$28.9M	$25.3M
Net income per share (diluted)	$0.09	$0.05
Working Capital	$24.3M	$21.8M
Total Assets	$149.0M	$136.4M

Axia's Business

North America Europe Asia Pacific

Business Unit Summary North America

4,712

number of Active Connections (in AB)

number of Customer RSPs (in AB)

18%

bandwidth growth

North America remains Axia's most profitable business unit with revenues of $56.7M, up 10% over the previous year. The Alberta business saw an 18% increase in bandwidth usage and significant Other Services revenue growth of 63%. This growth is primarily attributed to the quantity and magnitude of connection services projects under construction or completed in Alberta.

MassBroadband 123, Massachusetts

MassBroadband 123 in Massachusetts, United States, is Axia's newest network. Axia has the exclusive right to sell fibre-based infrastructure services over the network. In February 2011, Axia was awarded a ten-year extendable agreement to be the Network Operator of the MassBroadband 123 network consisting of 2,153 kms of fibre backhaul infrastructure and electronics in Western and North Central Massachusetts. The government of Massachusetts chose Axia as a partner in this initiative because of our proven success in diverse jurisdictions throughout the world.

388,000 households

44,300 businesses

1,400 community anchor institutions

Alberta SuperNet, Alberta

Since becoming fully operational in 2005, Axia's Alberta SuperNet business has consistently generated annual revenues between $51M and $55M. Axia's Alberta NGN is comprised of Axia-owned assets complemented by assets licensed from the Government of Alberta (GoA).

13,000 km total fibre

2,000 km wireless connectivity

429 communities

Business Unit Summary Europe

1,830

number of Active Connections (Covage)

number of Customer RSPs (Covage)

12%

bandwidth growth

FY2011 showed significant revenue growth in Axia's European business, with bandwidth revenues growing 46% to $17.4M. France has moved from a construction phase to activation and Spain has begun to sell services on existing infrastructure. Axia's NGN Xarxa Oberta in Spain was activated in Q4 and attributed early-stage revenue of $0.2M.

Covage's National Network, France

Covage's growing market penetration is beginning to generate positive cash flows, creating a solid platform for future profitability. Covage's business in France accounts for 27% of Axia's total revenue. Construction revenue, which Axia includes in Other Services revenue, has decreased over the prior year as a result of a reduction in construction activity on the regional network.

7,750 km of fibre

125 wireless stations

15 public initiative networks

Xarxa Oberta, Catalonia

Axia's award of the Xarxa Oberta network in Catalonia, Spain, in November 2010 expands our operations outside of France. Xarxa Oberta will actively sell wholesale services over its network. In addition, the Generalitat of Catalonia has committed to purchasing €253.0M, including VAT, of Broadband Services over the 20-year contract.

95 municipalities

5.4M addressable population

696 Generalitat sites

Asia Pacific

2011 marked the first year OpenNet earned significant revenue of $6.8M. The OpenNet NGN Solution is the first comprehensive metropolitan Fibre to the Premise (FTTP) deployment in the world and will demonstrate that compelling prices, performance and choice can be achieved by employing the elements of Axia's NGN Solution.

Singapore has set a new global standard for digital infrastructure. Now, Axia has proven that its approach to implementing NGNs meets visionary public interest requirements and provides a compelling value and performance in a modern metropolitan jurisdiction. Axia's presence in Singapore provides an efficient base to explore business opportunities through the Asia Pacific area.

OpenNet, Singapore

Axia has a 30% interest in OpenNet, the network company in Singapore selected by the government to sell services on the passive fibre infrastructure of Singapore's FTTP network. OpenNet owns the fibre optic grid and has a 25-year renewable licence to provide services to RSPs. Currently, construction to more than 70% of premises has been completed which consists of over 881,000 residential premises and 19,000 commercial premises.

694 km² total area

5M population

Next Generation Networks

Economic Development Rural Development Health Networks Education Networks Business Networks

Economic Development

US$223M

total investment in Public Private Partnerships (PPPs) through Broadband Canada: Connecting Rural Canadians program as part of Canada's Economic Development Plan

>100Mbps

EU2020 strategy's goal for Internet speeds available to >50% of residents in preparing Europe's economy for the next decade

Economic Development

Next generation networks are increasingly seen as critical infrastructure in economies where Axia operates as they promote reliable and cost-effective broadband access for all constituents. For more than a decade, Axia has successfully sold services on high-performance fibre communications infrastructure. We are experts at bringing infrastructure services to underserved markets worldwide. A key to our success has been our ability to balance customer needs, government objectives, and regulatory regimes in an economically viable way.

Rural Development

rural Americans will receive access to broadband as part of the American Recovery & Reinvestment Act to ensure access to innovative technology, open new markets for crops, promote production of renewable energy and better utilization of natural resources

$3.5B

is being spent in America through the Broadband Initiatives Loan & Grant Program

89%

of loans & grants in the US were awarded to "last mile" initiatives,
creating 25,000 immediate jobs

Rural Development

Rural communities globally are investing in state-of-the-art broadband infrastructure to drive rural development and ensure communities remain sustainable for generations to come. This investment creates jobs in the short term, and long-term opportunities for rural communities to attract and retain people, raise families and compete in the global marketplace by providing residents with cost-effective connectivity.

Axia's NGN Solution levels the playing field in metropolitan, rural and remote areas. The price of Axia's transport services does not change based on who the customer is, how big they are or where they are located. This approach to pricing helps to bridge the digital divide, eliminating the distance and market size challenges that limit access to reliable connectivity. Because of this, rural communities have access to the same opportunities as metropolitan areas, providing access to the global marketplace that drives today's economy.

Health Networks

125

communities served and 1,100 Tele-health endpoints in Alberta

38%

decrease in transfers to urban hospitals and $390,000 in
savings (Alberta stroke acute care via Tele-health)

47km

the estimated distance per trip saved by rural/remote
Canadians in 2010 because of Tele-health services

Health Networks

The health care sector is on the leading edge of innovation, driving technology that personalizes patient care. Through programs like Tele-health, the availability of single, high capacity, reliable network infrastructure is imperative to its success.

Axia provides uncompromised Real Broadband™ services, that enable end users to quickly and reliably exchange large amounts of voice, video and data. With advances in healthcare technology and the demand for any time, anywhere information, broadband has become critical infrastructure for the future. Unquestionably, this demand for high-performance networks aligns with Axia's business principle of uncompromised reliable connectivity available to all, no matter their location.

Education Networks

$2.25B

is the investment by the US government into the E-rate program, which assists in providing Internet access in virtually every school

$18.5M

per year since 2008 has been spent to integrate technology in Grade 1-12 classrooms throughout Alberta in an effort to enable students for global citizenship and lifelong learning and participation in the world of work
(source: Alberta Education website)

25%

of schools will be part of the Schools of the Future and serve as test beds for innovative infocomm usage in classrooms throughout Singapore

Education Networks

In today's rapidly changing education landscape, students need access to technologies that are transforming learning for generations to come. In the knowledge economy, students are seeking information beyond the bricks and mortar of the traditional schoolhouse. Innovations in technology, research and science are driving this change, requiring access to high bandwidth connectivity. Axia's approach to next generation connectivity separates the operations of the network from services provided over the network. The Axia NGN Solution ensures that end users (like schools) benefit from being able to choose their services from providers who best meet their needs. This creates a competitive environment for these services and greater choices at lower cost, allowing for public investment into tools that will help prepare our students for global citizenship and lifelong learning.

Business Networks

30%

per year: growth predicted for the use of network sensor nodes in transport, auto, industrial, utility and retail sectors

$100B

predicted revenue generated from global personal location data for Service Providers

51%

of all retail sales by 2013 will be web-influenced or online

Business Networks

The ability to create, share and access information has revolutionized the way we do business today. Innovations in sensors, machine-to-machine (M2M) technology and the availability of high-capacity data have led to these changes. Organizations who do not have access to reliable connectivity are falling behind their competition. Access to infrastructure at affordable rates is a priority for today's business community.

Axia is experiencing continued demand growth for its fibre infrastructure services as our customers' needs evolve. Axia provides uniform wholesale pricing across entire network regions which results in a vibrant RSP market. We are introducing and facilitating improved services and new connections that enable Axia's customers to further leverage our networks for Cloud Computing and Data Processing services.

The Future of Broadband

Smart phones explosion The need for next generation broadband Broadband penetration rates usage exponentially increasing

Smart phones explosion

15X

more bandwidth is used up by smart phones than regular phones

From The Global Information Technology Report 2010-2011, 1.3 Building Communities around Digital Highways

The need for Next Generation Broadband