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Press Release -- January 13th, 2011
Source: Zayo Group
Tags: Colocation, Construction, Earnings, Ethernet, Expansion, Wavelength

Zayo Recaps Key 2010 Milestones

Zayo RECAPS KEY 2010 MILESTONES

Strategic acquisitions, network expansions and solid financial growth

LOUISVILLE, Colo. – Jan. 13, 2011 –Zayo Group, a leading provider of fiber-based bandwidth infrastructure and network-neutral colocation and interconnection services, ends a successful 2010 having achieved several key milestones including: strategic acquisitions, organic network expansions, financial growth, and its inception as a public reporting entity in association with its fixed income offerings.

“Through success-based investments and value-creating acquisitions, Zayo extended its footprint to 153 markets, including eight new metropolitan markets,” said Dan Caruso, president and CEO of Zayo.  “We also generated organic growth and margin expansion by leveraging our existing fiber assets to provide solutions for our customers.”

Key 2010 milestones included:

Financial Performance

For the quarter ended September 30, 2010, just prior to the completion of the American Fiber Systems acquisition, Zayo achieved annualized revenue of $274.3 million and adjusted EBITDA of $107.2 million. In addition, Zayo expanded its adjusted EBITDA margin by 5% to 39% over the three quarters ended September 30.

In 2010, Zayo completed senior secured note offerings of $250 million and $100 million to: finance the AGL Networks and American Fiber Systems acquisitions, retire existing bank debt and fund general corporate needs. In conjunction with the notes offerings, Zayo began holding quarterly earnings calls and releasing comprehensive quarterly earnings supplements in May. This information can be found in the investor relations section of www.zayo.com.

Acquisitions

On July 1, 2010, Zayo completed its acquisition of AGL Networks, adding nearly 800 route miles of metropolitan fiber network and 281 incremental buildings in Atlanta, Charlotte and Phoenix. AGL was a pure play dark fiber infrastructure provider and, in conjunction with the transaction, Zayo launched its dark fiber focused business unit, Zayo Fiber Solutions.

On October 1, 2010, Zayo completed its acquisition of American Fiber Systems, a bandwidth infrastructure provider with over 1,200 route miles of unique fiber assets and 619 incremental buildings across nine metropolitan markets, six of which are new to Zayo.

Also in October, zColo, Zayo’s network neutral provider of colocation and interconnection services, announced its acquisition ofa 15,400 gross square foot colocation facility in downtown Nashville, complementing the expansive metropolitan fiber network acquired in the American Fiber Systems transaction.

Network Expansion

Zayo continues to focus on success-based capital investments, adding 946 on-net buildings and towers to its fiber network during 2010, with another 918 under construction.  Included in the current on-net total are 119 enterprise buildings which enable Zayo’s medical, education, finance and government customers to meet growing bandwidth demands.  Zayo also lit its dark fiber and conduit networks in Denver and Phoenix for wavelength and high bandwidth Ethernet services.

A large portion of its success-based capital has involved fiber-to-the-tower deployments as Zayo continues to expand its coverage for wireless carriers.  It added 789 towers on a success basis during 2010 and has an additional 754 towers under construction. Zayo has leveraged these deployments to expand its fiber density and reach in a number of markets, including Minneapolis-St. Paul, Memphis and central Pennsylvania. Zayo also launched Antenna Infrastructure Solutions (AIS), a new service offering enabling wireless carriers to leverage Zayo’s network and operating experience to economically extend coverage.

Zayo has been an active participant in the National Telecommunications and Information Administration’s broadband stimulus program. Zayo is the lead recipient on two awards: a $25.1 million grant to construct 626 miles of fiber network in Indiana and a $13.4 million grant to construct 286 miles of fiber network in Anoka County, Minnesota.  Zayo is also a participant on other stimulus and rural broadband projects developing approximately 2,000 route miles of fiber network in Ohio, Nebraska and Colorado.

“We would like to recognize and thank our customers, employees and investors who contributed to our 2010 success and look forward to meeting our customers growing bandwidth infrastructure needs in 2011.” Caruso said.

Zayo will release its calendar year fourth quarter earnings results and host an associated earnings call on Friday, February 11, 2011. Details of the event will follow.

Zayo Group, LLC Reconciliation of Non-GAAP Financial Measures

($ in millions)

Three months ended
September 30, 2010
Earnings/(loss) from continuing operations $ (0.3)
Interest expense 6.3
Income tax expense 3.0
Depreciation and amortization expense 12.4
EBITDA 21.4
Transaction costs 0.2
Gain on bargain purchase of FiberNet, Inc.
Stock-based compensation 5.2
Adjusted Quarterly EBITDA $ 26.8
Annualized EBITDA (Quarterly Adjusted EBITDA x 4) $ 107.2

About Zayo Group
Based in Louisville, Colorado, privately owned Zayo Group (www.zayo.com) is a leading provider of fiber-based bandwidth infrastructure and network-neutral colocation and interconnection services.  Zayo Group is organized into autonomous business units supporting customers who require lit and dark fiber services and carrier neutral colocation.  Zayo’s business units provide these services over regional, metro and fiber-to-the-tower networks.

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Julia Kendall

jkendall@zayo.com

1+ 303.381.3367

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