Newly Public HSA Focused on Rollouts

Publish date:
Updated on

With money in hand from its recent initial public offering,
High Speed Access Corp., the Littleton, Colo.-based data-over-cable company, can now focus
on rolling its services out to cable providers.

HAS, which counts Microsoft Corp. co-founder Paul Allen as
a major investor, will use most of the proceeds of the offering -- about $169 million
-- to begin service in additional markets. HSA already offers service in 42 cable
systems passing 721,000 homes, and has contracts or letters of intent to provide service
in another 32 systems, covering 564,000 homes passed.

HSA chairman Ron Pitcock last week said the company is well
on its way to reaching that goal, and is deploying its turnkey service in about three
cable systems a week. HSA's offering is currently available in about 42 cable systems
around the country.

"It's back to business," Pitcock said.
"We've got to get our systems put in place and get demand growing. We've got a lot of
work in front of us."

HSA sold 13 million shares of common stock for $13 a share
on June 4. Trading was fast and furious, with the stock rising as high as $20.50 a share
on its first day of trading, before closing at $20.38.

Investors apparently were hungry for the stock, as 16.5
million shares traded hands on the first day of the offering. And the stock continued to
climb -- reaching as high as $26.50 per share on June 7, finishing the day at $24.50 a

Although the offering price could seem a little low, given
the high-flying nature of many Internet stocks, Pitcock said the company considered
setting its IPO price a little higher but decided against it.

"We looked at where the market was and the market was
pretty volatile," Pitcock said. "We wanted a price the market would accept. We
wanted a nice steady rise and a secure type of stock."

Although Pitcock said the HSA offering wasn't a "moon
shot" like other Internet IPO's, he added that many of those stocks have fallen back
down in the weeks that followed their initial offerings.

Janco Partners analyst Tom Friedberg said the price was
reflective of current market conditions, and added that other factors may also have come
into play.

"They came public under tremendous pressure to @Home
[Networks]," Friedberg said.

@Home, which provides data-over-cable service to more that
460,000 subscribers in North America, has been under fire of late regarding opening its
network to other Internet Service Providers which could have led to weak demand for cable
modem stocks in general.

And the recent decision by a Federal District Court judge
in Portland, that would require @Home to open its network to other Internet Service
Providers could have a positive effect on HSA, which already opens its network to other

"That certainly could make them more attractive,"
Freidberg said. "If you have other municipalities that are suddenly cognizant of
these issues and don't want to have a closed system, it makes them more attractive. But is
this going to sway the [AT&T's] and MediaOne's away from @Home, or the Time Warner's
away from Road Runner? I hardly think so."

Pitcock also downplayed the benefit of the decision on his

"We are a cable-oriented company," Pitcock said.
"And we will always stand up on the cable side. This is a fight that should be fought
in the boardroom, rather than the court room."

Although Pitcock said the ruling might benefit HSA slightly
with those cable operators that have no high-speed Internet strategy in place, HSA does
not expect it to cause a flurry of new business. He added that HSA will continue to
"knock on the doors," of cable operators and will not use the Portland decision
as a "scare tactic."

HSA also has a connection to one of the larger cable modem
services companies -- it has a letter of intent to provide its services through Road
Runner, which is partly owned by Time Warner Inc. and MediaOne Group Inc.

Pitcock could not comment on the Road Runner agreement,
citing that the company is still in a "quiet period" where it is prohibited from
promoting its stock.

According to U.S. Securities and Exchange Commission
filings, HSA has agreed to "negotiate in good faith toward an agreement under which
we would provide our service as a Road Runner subcontractor to cable systems we jointly
designate to receive our services."

In addition to the revenue split HSA would share with Road
Runner and the cable operator, HSA will also grant Road Runner warrants to purchase one
share of HSA's common stock for $5 a share for each home passed that the two companies
designate to receive the service, up to a maximum of 5 million shares. Also, Road Runner
receives the right to provide its content over the service.

Pitcock said now that the offering has been completed, HSA
will focus on rolling out its turnkey high-speed Internet solutions for small and
mid-sized cable operators.

One way the company will not be growing is through
acquisition, at least for the immediate future, Pitcock said. But, he added that the
company will continue to pursue agreements with cable operators to offer its service.

"We should be positioned to execute our full business
plan," Pitcock said.

The company already has a commitment from Allen's Charter
Communications Inc. to provide service to up to 750,000 subscribers of the St. Louis-based

Allen invested about $20 million in HSA in December.