Covad Communications, NTT Communications, ACCA Networks and Ignite Japan Sign Agreement to Provide DSL in Japan.

Business Editors/High-Tech Writers

TOKYO--(BUSINESS WIRE)--Aug. 10, 2000

Covad Communications (Nasdaq:COVD), the nation's leading broadband services provider of DSL (Digital Subscriber Line) technology, today announced that it signed a formal agreement with NTT Communications Corporation, (NTT Com), Japanese communications company, ACCA Networks, Co. Ltd., and Japan-based venture capital firm Ignite Japan KK, to provide local broadband network services using DSL to major metropolitan areas in Japan.

Under the agreement, both Covad and NTT Com will acquire a 41.8 percent stake in ACCA, which is an investment of $11.5 million USD (approximately 1.25 billion yen). Ignite, through its affiliated IT 2000 fund, will acquire a 6.7 percent stake, which is a total of 1.6 million USD (170 million yen). The remaining 9.7 percent will be held by the five founders of ACCA. ACCA will issue additional stock options for its employees.

For Covad, this is an equity investment without additional financial commitments, requiring no additional expenses in its financial model, outside of the equity ownership and cash investment on the balance sheet. ACCA will continue to raise private and ultimately public funding as it grows, in which Covad has the right of first refusal to participate in subsequent financing rounds. Covad will also hold two seats on the ACCA board.

Under the agreement, NTT Com, through its OCN and other brands plans to use ACCA's DSL lines to meet increasing customer demand for faster Internet access and other wide bandwidth applications. The goal is to build out over 450 central offices (COs) in 17 markets by the end of 2001. This is expected to cover 40 percent of businesses and 33 percent of homes in Japan. Covad will assist ACCA in the deployment of its broadband DSL network by leveraging its experience in large-scale DSL network operations.

Covad will also license its proven, scalable Operational Support System (OSS) to ACCA with exclusive rights in Japan. The OSS will allow ACCA's sales partners and their end users to automate and streamline the ordering and provisioning process. Ignite has provided ACCA with hands-on support for the growth of the company since its establishment and will continue to support ACCA's growth strategy financially and operationally.

"We are investing thoughtfully and prudently in Japan, which we have always known is an important opportunity for the deployment of broadband services," said Robert E. Knowling, chairman, CEO and president of Covad. "The Japanese regulatory market is opening up and we are working with the largest phone company in the world, which is providing human resources and marketing support. Importantly, we are also licensing our OSS to ACCA that, by itself, could pay back our entire cash investment."

ACCA, a broadband access network provider founded in March of this year, was registered as a Type II telecommunications carrier in April. ACCA will launch pilot DSL services this fall in selected areas in Tokyo and will expand to a commercial nationwide service starting early 2001. ACCA plans to evaluate offering access services utilizing other technologies as well in the future.

As a wholesaler, ACCA will provide its DSL services to business users as well as residential users primarily through Internet Service Providers (ISPs) and telecommunications carriers. ACCA expects that ISPs and telecommunications carriers will bundle their Internet backbone and other network services with ACCA's access services to provide packaged broadband services under the operators' brand to end users.

The synergy created by a dynamic startup team, Japan's premier brand name and customer base, USA's leading broadband DSL services provider, and the financial backing of a leading venture company, should launch this alliance into a leadership position in the Japanese Internet market.

"The lack of competitive broadband access solutions has been bottlenecking Japan's IT explosion. This alliance is a dream team offering such a solution which will also bring socioeconomic changes in this country," said Hidehiko Yuzaki, a founder and CEO of ACCA Networks.

Masanobu Suzuki, President and CEO of NTT Communications, said, "ACCA Networks will be an important vehicle for NTT Communications' continued expansion into high quality broadband services. NTT Com will continue to strengthen its commitment towards up-to-date customer needs and establish a end-end information distribution value chain by expanding its high-speed access capabilities. We also expect that the partnering with Covad Communications, which has been successful in the U.S. market with its entrepreneurship, will bring great advantage to business in the competitive and fast-moving Japanese market."

Nobuo Mii, Managing Partner, Ignite Group, said, "The synergy of combining the expertise and brand name of leading companies with the energy and nimbleness of a dynamic startup is a success formula for creating high-growth companies in the Japanese venture market. The ACCA partnership is a good example of using such a success formula. Ignite is proud to be part of this promising team."

About DSL (Digital Subscriber Line)

DSL is a proven technology that takes advantage of standard copper telephone lines to provide, reliable, high-speed Internet access. Users can receive speeds of up to tens of times faster than traditional dial-up methods such as analog modems and ISDN. Furthermore, unlike traditional dial-up connections, DSL delivers continuous "always on" access. In the past two years, DSL has established itself as a mass market technology around the world and is being deployed in almost all major countries in North America, Europe, and Asia. In Japan, the regulatory and technical environment is being cleared to allow DSL to be served nationwide.

About Covad Communications Company

Based in Santa Clara, CA, Covad Communications (Nasdaq:COVD) provides ultra-fast, affordable, "always on" broadband access services utilizing DSL (Digital Subscriber Line) technology that connects home and business users to the Internet. Covad's flagship services, TeleSurfer(SM) for residential customers and TeleSpeed(TM) for small businesses, are readily available to consumers and businesses through a host of over 250 leading Internet Service Providers (ISPs). TeleSpeed Remote and Virtual Private Network over DSL services are also available to corporations with remote workforces who need a fast, affordable and secure method of connecting "teleworkers" to the Internet and corporate network. Covad services are also available through application service providers, PC/OEM manufacturers, and enterprise companies. Covad also offers virtual broadband services. These services are available as a result of the company's acquisition of LaserLink.net, a leading provider in the rapidly growing area of branded Internet access.

As the leading national DSL broadband services provider, Covad's network currently covers more than 42 million homes and businesses in major Metropolitan Statistical Areas (MSAs). Covad services are available across the United States in 96 of the top Metropolitan Statistical Areas (MSAs). Covad services will be available in 165 MSAs by the end of 2000. At that time, Covad's digital network will reach more than 45 percent of all US homes and 50 percent of all US businesses. Covad currently has 1700 Central Offices (COs) service-ready and expects to have 2400 COs service ready by the end of 2000.

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

The statements contained in this release which are not historical facts may be deemed to contain forward-looking statements, including but not limited to statements regarding the intention to deploy Covad's network in new and existing United States MSAs, the timing and breadth of coverage in each MSA, Covad's ability to deliver audio, video and other high-bandwidth applications and Covad's ability to build a network that can bypass Internet congestion. Actual results may differ materially from those anticipated in any forward-looking statements as a result of certain risks and uncertainties, including, without limitation, the company's dependence on incumbent local exchange carriers for collocation, unbundled network elements, transport and other facilities, development of necessary technologies and operations, ability to manage growth of Covad's operations, and the need to raise additional capital. For other risks and uncertainties applicable to Covad's business refer to our Securities and Exchange Commission filings.