Investment Highlights
Disruptive wireless broadband pure-play (WiMAX) targeting SME's with
high-speed services at lower cost and higher bandwidth than the RBOCs
"Cookie-cutter" proven, recurring revenue model with six markets launched
(NYC, LA, SF, Chicago, Boston, Rhode Island).
70%+ gross margins, EBITDA+ since 2004, success-based capex model with
rapid time to market.
Typical market ramps to EBITDA+ within 12 months. Market expected to
generate $4.6MN revenues and $2.7MN EBITDA contribution within three
years.
Use of proceeds includes ramping telesales from 18 today to 200, launch four
more markets and purchase spectrum – Long-term goal of 30 markets
nationwide.
Comparable transactions suggest considerable upside, including
Fibertower (acquired for $1.5BN by First Avenue Networks; $6MN in annual
revenues)
Clearwire (sold 38% of $12MN run rate services business to Intel for $600MN,
suggesting a $1.6BN valuation).
Experienced management team
4
TowerStream Overview and History
TowerStream is the recognized leader in the fixed wireless and WiMAX
industry and is an established trusted provider of quality service
TowerStream is a provider of low-cost broadband access utilizing
wireless technology
History
Company founded in Rhode Island
Service launched in Boston and Providence
Service launched in New York
Service launched in Chicago
Service launched in Los Angeles
Successful completion of Mobile VOIP over Wi-Fi
Service launched in San Francisco
January 2000
April 2001
June 2003
March 2004
December 2004
March 2005
October 2005
5
Experienced Management Team
Founder & Vice President, eFortress; B.S.
Engineering, University of Massachusetts
Founder,
President &
CEO
Jeff Thompson
Director of Engineering, Sockeye Networks;
Director, Navisite; Director, Digital Broadband;
Engineer, Bell Atlantic
VP
Engineering
& Operations
Arthur Giftakis
CFO & Director, Stratos Global Corporation
(SGB.TO); VP, Fleet Investment Banking, AVP,
Bank of Boston; B.S Hartford University; MBA
University of Chicago
CFO
George E. Kilguss, III
Founder, eFortress; Founder, MCF
Communications; B.A. Northwestern University
Founder &
Chairman
Phillip Urso
Experience
Title
Name
6
TowerStream Solution
TowerStream provides an affordable, capital efficient, rapid time to market
alternative to traditional land based solutions
WiMAX technology advantages:
Not limited by existing telco infrastructure
Legacy T1 infrastructure has physical limitations
1.5 Mbps per circuit
Distance-based tariffs can become cost prohibitive
Service delivery average in U.S. is 26 business days
Supports last mile Quality of Service (“QOS”)
DSL is not a reliable way to deliver real time applications and does not support
QOS
Distance restrictions limit addressable market
Legacy copper infrastructure can be unreliable
Bypasses existing monopoly infrastructures
RBOCs control last mile and no longer have to offer high speed access at cost to
competitors
Cable MSOs remain deregulated
7
TowerStream Wins on Features and Price
TowerStream can deliver broadband solutions in any increment from 1-100MB
at 20-40% off RBOC pricing for comparable bandwidth
DS3 (45MB)
$4,500/month
4xT1 (6MB)
$2,500/month
Five 9’s product
not available
from RBOC
Not available
from RBOC
T1 (1.5MB)
$550-
$650/month
Two T1’s connected
to different WiMAX
base stations
Industry First “five
9’s” SLA
Hi-VI T1+
$600/month
SLA guarantees 1.5
Mbit/s of duplex
1.5 MB with
additional traffic
flow set at best effort
3 MB for
$500/month
Dynamic bandwidth
allocation
QOS allows users to
run VOIP
Low cost IP solution
for Data and/or
Voice
Full Duplex T1
w/ QOS
$398/month
Full duplex service
Upgradeable in
minutes using same
equipment
Mid-range product
not offered or
available from
RBOC
6MB scalable to
10MB starting
at $1,650/month
RBOCs only
required to offer
tariff rates up to
45MB
Same cost, twice the
speed and delivered
in days
10MB to
100MB from
$3,600 to
$5,000/month
8
TowerStream WiMAX Products (cont.)
High-Speed SME Broadband Solutions
512K – 4MB using point to multipoint base
stations
5Mbps – 25MB using high capacity point to
multipoint base stations
Enterprise Broadband
10MB - 1GB using high capacity point to
point connections
Fiber equivalent speeds at much lower cost
and quicker deployment
9
Rapid installation: can install in 3-5 business days, compared with
approximately 30 days with land based solutions
Value: 25-40% discount to embedded landline base
Single solution: TDM, Voice, Data and Video over a single
connection
Speed and scalability: Can offer bandwidth from 512k to 1 Gbps
Reliability: TowerStream delivers the most reliable last mile
solution in the marketplace today
First provider to offer “five 9’s” guarantee
Why Customers Choose Towerstream
Better – Faster – Cheaper
10
Existing WiMAX Installations
11
TowerVision – Effective Customer Sales Tool
Provisioning
Real time
monitoring
Web based
troubleshooting
tools
Full customer care
support tools
12
Addressable Market Opportunity Today
Source: Gartner Research and Towerstream estimates.
Businesses
with 5-249
Rank
Metro Area
Employees
1
Los Angeles
176,989
2
New York
127,089
3
Chicago
96,240
4
San Francisco
73,877
5
Washington DC
70,149
6
Miami
67,478
7
Dallas - Ft. Worth
65,671
8
Philadelphia
59,433
9
Atlanta
56,868
10
Detroit
51,284
11
Houston
51,110
12
Newark
49,424
13
Boston
48,036
14
Denver
42,795
15
Minneapolis
38,215
16
Phoenix
36,405
17
San Diego
33,017
18
Seattle
32,212
19
St. Louis
31,878
20
Baltimore
30,564
Total
1,238,734
IT services market is expected to grow from
$628.8BN in 2005 to $855.6BN in 2010
worldwide
U.S. T1 market $13BN+; wireless backhaul
market $2BN+
Source: Dunn and Bradstreet.
13
Nationwide Expansion Plan
Successfully rolled out six cities thus far:
New York, L.A., Chicago, Boston, San Francisco and Providence
Three phases of business plan will position Towerstream as the market leader in
WiMAX business services
Targeting 1-2 new markets per year during Phase I, with accelerated rollout of organic
growth plan thereafter
New cities projected EBITDA positive within 12 months
Mature market generates annual revenues of $6MM and EBITDA of $3.5MM
Phase I: 10 cities; Phase II: 20 cities; Phase III: 30 cities
Build world class sales organization to drive revenue
Hire head of sales
Expand inside salesforce
Continue securing the most desirable tower locations
First mover advantage allows the company to secure optimal locations with long term
leases; better locations, lower network OPEX and CAPEX
14
Cookie-Cutter Proven Model
Identify strategic rooftop locations in metropolitan area
Negotiations typically last 6-9 months
Rent per rooftop ranges from $2-8K per month
Deploy gigabit mesh metro backbone including multiple points
of presence
CapEx of $175K per POP
Total cost averages $700 thousand
Hire 20-30 salespeople per market to target the Small and
Medium sized enterprise (SME) market
Telesales model allows TowerStream to staff up quickly and prospect
for customers immediately after network deployment
Outsourced installation crews provide service/support
15
Target Market Operating Goals
Assume $700k in fixed cost to enter any given market
Target market operating goals within 36 months
EBITDA(1) positive 12 months from market entry
1.2
New Midsize product
$3.4
Existing WiMAX products
4.6
Total Revenue
$2.7
58.7%
Total EBITDA(1)
Market revenue 1,000 subs.
Note: Excludes corporate overhead.
Assume it takes 250
subscribers to become
EBITDA(1) break even
If TowerStream is able to sign
up 500 customers in any given
market, EBITDA (1) margins
reach 48%. If 1,000
subscribers, EBITDA (1)
margins approach 60%.
(1) EBITDA as calculated is based only on direct costs incurred in the markets and do not include allocations of centralized costs and overhead.
16
Use of Proceeds
7.0
New Metro market developments
$20.0
3.0
$10.0
Working capital
Total
Existing market salesforce expansion
17
Summary Income Statement
(Unaudited)
Nine Months Ended
Year Ended
09/30/06
09/30/05
12/31/05
12/31/04
Revenues
4,733,028
$
3,995,550
$
5,397,510
$
4,602,109
$
Operating Expenses
Cost of revenues
1,242,038
1,080,937
1,509,505
1,026,068
Depreciation
876,792
686,908
933,557
742,636
Customer support services
411,088
315,219
419,356
378,767
Selling, general and administrative expenses (includes equity based
compensation expense of $61,298 in 2006 and $0 in 2005 and $0 in 2004)
2,334,307
2,334,246
3,265,352
2,980,400
TOTAL OPERATING EXPENSES
4,864,225
4,417,311
6,127,770
5,127,871
OPERATING INCOME/(LOSS)
(131,196)
(421,761)
(730,260)
(525,762)
Other Expense/(Income)
Interest expense, net
169,853
157,221
216,945
214,740
Other income and gain on retirement of debt
(114,339)
-
-
(40,838)
Other expense
-
-
-
-
TOTAL OTHER EXPENSE
55,514
157,221
216,945
173,902
NET LOSS
(186,711)
$
(578,982)
$
(947,205)
$
(699,664)
$
Net loss per common share - basic and diluted
(0.01)
$
(0.03)
$
(0.05)
$
(0.04)
$
Weighted average common shares outstanding
21,245,717
20,689,729
20,776,874
19,548,257
EBITDA
745,595
265,147
203,297
216,874
EBITDA margin
15.8%
6.6%
3.8%
4.7%
CAPITAL EXPENDITURES
(734,560)
(986,075)
(1,369,527)
(995,262)
18
Summary Balance Sheet
CONDENSED BALANCE SHEET
As at September 30, 2006 and December 31, 2005
(Unaudited)
September 30,
December 31,
2006
2005
Assets
Cash
405,640
$
203,050
$
Accounts receivable, net
172,643
173,650
Prepaid & Other Expenses
19,386
44,354
Total Current Assets
597,669
421,054
Property and equipment, net
3,578,282
3,720,514
Other assets and security deposits
64,185
64,185
TOTAL ASSETS
4,240,136
$
4,205,752
$
Liabilities
Revolving note, stockholder
250,000
$
250,000
$
Current maturities of long-term debt
1,514,543
750,967
Accounts payable and accrued expenses
414,854
479,476
Deferred compensation
180,000
125,000
Deferred revenue
386,127
452,322
Total Current Liabilitites
2,745,524
2,057,765
Long-term debt, net of current maturities
310,504
1,071,931
TOTAL LIABILITIES
3,056,028
3,129,695
TOTAL STOCKHOLDERS' EQUITY
1,184,108
1,076,056
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
4,240,136
$
4,205,752
$
Draft
19
Current Capitalization/Ownership
Ownership
Holder
Description
Shares held
percentage
Phillip Urso
Chairman
4,940,206
23.2%
Jeff Thompson
CEO
2,879,190
13.5%
Howard Haronian
Director
2,459,198
11.5%
George Kilguss
CFO
1,330,000
6.2%
Urso relatives
10 individuals
2,869,846
13.5%
David Bourque
Individual
1,060,000
5.0%
Raymond Bourque
Individual
900,000
4.2%
Philip Norton
Individual
708,400
3.3%
Kevin Grills
Individual
607,754
2.9%
Two Cranes Trust
Trust
540,000
2.5%
All others
45 Individuals
3,010,383
14.1%
Total shares outstanding
21,304,977
100.0%
Capital
Percentage
Total equity dollars invested
8,746,178
$
79.4%
Total debt outstanding
2,273,432
20.6%
Total capitalization as of 09/30/06
11,019,610
$
100.0%
20
Summary
Opportunity – With a low cost IP based network, there is significant
opportunity to change the way broadband is delivered and to make a
significant return on investment
First Mover- We have developed a unique and hard to replicate business
model by staying away from the status quo of legacy telecom and being
capital efficient
Experience - Towerstream has spent the last 5 years operating and
deploying wireless networks in major urban markets - It has the know how,
proprietary systems, and management experience to be successful
Brand – Towerstream is the recognized leader in the fixed wireless and
WiMAX industry and is already a trusted provider of quality service
21
Investment Highlights
Experienced and proven operator of broadband wireless
networks (WiMAX)
Six markets currently deployed
Poised for rapid expansion in top markets across the country
High margin recurring revenue model
Cost efficient all IP network
EBITDA+
Regulatory environment favorable for WiMAX as alternative
last mile solution
Focus on intermodal competition (RBOC v. Cable v. Wireless)
Technology proven, platform highly scalable
Strong management team with extensive experience
Build world class sales organization – to capitalize on existing
network investments
22
Gigabit Mesh Back-Bone Architecture
Existing POPs
Planned network expansion
23
towerstream®
24
