CLEC Consolidation: Birch, Ionex Reveal Merger Plan

Birch Telecom Inc. today announced plans to merge with Ionex Telecom Inc. in a deal that will create one of the largest competitive telephone service providers in the southern and central United States.

The combined company will serve at least 500,000 telephone lines, heavily concentrated in Texas, Oklahoma, Missouri and Kansas, and generate $350 million in annual revenue.

The new company will be named Birch Telecom. Birch President and CEO David E. Scott has been named CEO of the new company. Rick Pontin, CEO of Ionex, will join Scott in overseeing the integration of the two company's operations.

"I'm confident that with the excellent fit between the two companies and the scale of the new enterprise, we'll be generating positive earnings within a year of the merger. In fact, this is likely to be the first company with positive free cash flow to emerge since the deregulation of the local telephone monopoly," said Scott.

An investment group led by Gilbert Global Equity Partners, AEA Investors, Veronis Suhler Stevenson LLC and Texas Growth Fund - the major backers of Ionex - will provide more than $40 million in equity funding. This investment will support the plans to bring new customers onto the company's network, as well as provide a significant cash cushion.

Both Ionex and Birch have specialized in serving small to mid-sized businesses, and both offer a variety of local, long-distance and broadband data services. The new company's flagship products will be the Superpipe family of services developed by Ionex, which use the company's next-generation Lucent network to deliver voice and high-speed Internet over a single connection.

Targeting small to mid-size businesses, Birch Telecom offers local and long-distance telephone service across more than 40 major metropolitan markets in 10 states: Alabama, Georgia, Kansas, Mississippi, Missouri, North Carolina, Oklahoman, South Carolina, Tennessee and Texas. Birch also owns and operates a high-speed data network, delivering broadband Internet access to businesses in Kansas, Missouri, Oklahoma and Texas.

Ionex Telecom provides voice and data services to small to medium-sized business customers in Texas, Oklahoma, Kansas and Missouri. Privately owned and based in Dallas, Texas, Ionex offers local and long-distance phone service, high-speed Internet access, and a suite of value-added voice and data products including email,voicemail, conferencing and electronic billing through the Ionex ATM network.

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