Covad Announces Fourth Quarter Operating Statistics.

Business Editors

SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 14, 2003

Covad Communications (OTCBB:COVD) today announced certain operating statistics as of December 31, 2002.

-- Covad added 23,000 lines during the fourth quarter, bringing total lines in service on December 31, 2002, to more than 381,000 lines.

-- Churn decreased each month throughout the fourth quarter, averaging 3.4 percent in the fourth quarter, an improvement from an average of 4.0 percent in the third quarter of 2002.

-- Covad ended the 2002 fiscal year with $205 million in cash, cash equivalents and short-term investments. Fourth quarter net cash usage was approximately $24 million, representing approximately $8 million per month.

"Last year was a year of revitalization for Covad," stated Charles E. Hoffman, Covad president and CEO. "We focused on building our base of business and consumer revenues, signing and strengthening key wholesale agreements with partners like AOL, AT&T, EarthLink and Sprint and strengthening our network operations. We also made progress on cost and operations control, as evidenced by solid churn improvement and prudent cash usage. We are entering 2003 in the best financial position in the company's history, with a solid corporate infrastructure and expanded growth opportunities."

With Covad's focus on growth during the quarter, the company increased its investment activity in customer acquisition and incentive programs. GAAP accounting treatment requires that certain expenses related to acquiring customers be classified as contra revenue, thus reducing reported revenues. The company estimates approximately $6.6 million of these acquisitions and incentive costs will be classified as contra revenue for the fourth quarter of 2002.

"While Covad's investment in these programs will cause us to report net revenues that are below our previously announced expectations, the return from these investments and recurring revenue that we expect them to generate are vital to our future success," Hoffman explained.

"Today, broadband is used by only 15 percent of Internet users, and Covad is well positioned to capture its fair share of customers wanting to make the move to broadband," continued Hoffman. "We are a national, facilities-based network with strong wholesale and direct distribution systems. We offer customers a very cost-effective choice of products and ways to buy broadband, and will continue to provide innovative services for small businesses and consumers."

About Covad Communications

Covad is a leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, T1, managed security, IP and dial-up services and bundled voice and data services directly through Covad's network and through Internet Service Providers, value-added resellers, telecommunications carriers and affinity groups to small and medium-sized businesses and home users. Covad services are currently available across the United States in 96 of the top Metropolitan Statistical Areas (MSAs). Covad's network currently covers more than 40 million homes and businesses and reaches approximately 45 percent of all US homes and businesses. Corporate headquarters is located at 3420 Central Expressway, Santa Clara, CA 95051. Telephone: 1-888-GO-COVAD. Web Site: www.covad.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

The statements contained in this press release that are not historical facts are "forward-looking statements," including Covad's expected increase in future revenue from customer acquisition investments, Covad's ability to convert non-broadband Internet users to its services and the statements made by the president and CEO and the assumptions underlying such statements. Actual events or results may differ materially as a result of risks facing Covad or actual results differing from the assumptions underlying such statements. Such risks and assumptions include, but are not limited to, Covad's ability to continue as a going concern, to continue to service and support its customers, to successfully market its services to current and new customers, to manage the consolidation of sales to a fewer number of wholesale customers, to successfully migrate end users, Covad's ability to generate customer demand, to achieve acceptable pricing, to respond to competition, to develop and maintain strategic relationships, to manage growth, to receive timely payment from customers, to access regions and negotiate suitable interconnection agreements, all in a timely manner, at reasonable costs and on satisfactory terms and conditions, as well as regulatory, legislative, and judicial developments and the absence of an adverse result in litigation against Covad. Covad disclaims any obligation to update any forward-looking statement contained in this press release. All forward-looking statements are expressly qualified in their entirety by the "Risk Factors" and other cautionary statements included in Covad's SEC Annual Report on Form 10-K for the year ended December 31, 2001 and its Report on Form 10-Q for the period ended September 30, 2002, along with Current Reports on Form 8-K filed from time to time with the SEC.