Filed by SR Telecom Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Netro Corporation
Commission File No. 000-26963
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Global Leader
Fixed Wireless Access Solutions
Experienced, Forward Thinking, Global, Innovative and
Reliable
Except for historical information provided herein, this presentation may contain information and statements of a forward- looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on managements best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Companys products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results. For more information regarding these risks and uncertainties, review SR Telecoms filings with the Canadian Securities Regulatory Authorities.
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Availability of Proxy Statement/ Prospectus
SR Telecom and Netro plan to file a registration statement on Form F- 4, including a proxy statement/ prospectus, and other relevant documents with the United States Securities and Exchange Commission concerning the acquisition, and Netro expects to mail the proxy statement/ prospectus to its stockholders in connection with the acquisition. Investors and security holders are urged to read the proxy statement/ prospectus carefully when it becomes available, because it will contain important information about SR Telecom, Netro and the acquisition. Investors and security holders will be able to obtain free copies of these documents, when they are available, through the website maintained by the United States Securities and Exchange Commission at www. sec. gov. In addition, investors and security holders may obtain free copies of the documents filed with the Securities and Exchange Commission by SR Telecom by contacting SR Telecom Investor Relations, 8150 Trans- Canada Highway, Montreal, Quebec, H4S 1M5, (514) 335- 1210. Investors and security holders may obtain free copies of the documents filed with the United States Securities and Exchange Commission by Netro Corporation by contacting Netro Corporation Investor Relations, 3860 North First Street, San Jose, California 95134, (408) 216- 1500.
SR Telecom and Netro, and their respective directors, executive officers, certain members of management and employees, may be deemed to be participants in the solicitation of proxies from Netros stockholders in connection with the merger. A description of the interests of Gideon Ben- Efraim, Netro Corporations Chairman of the Board and Chief Executive Officer, and certain of Netros other executive officers, employees and directors who may be deemed to be participants in the solicitation of proxies, and any additional benefit they may receive in connection with the merger, will be described in the proxy statement/ prospectus. Investors are urged to read the proxy statement/ prospectus and other relevant materials when they become available before making any voting or investment decision with respect to the acquisition.
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SR Telecoms Strategic Direction
SR Telecoms strategy is to build on its market leadership through organic growth and selected acquisitions in the telecommunications segment
SR Telecom has an installed base of FWA equipment in excess of two million lines in over 110 countries
SR Telecom sales and distribution presence in key markets:
France |
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Thailand |
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Australia |
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Brazil |
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Bolivia |
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China |
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Chile |
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Mexico |
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Peru |
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Saudi Arabia |
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United States |
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Ethiopia |
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Canada |
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Indonesia |
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Philippines |
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Strategy is to leverage the distribution network by widening the product offering and increasing addressable market opportunities
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Continued strengthening of our product portfolio through the
acquisition of complementary wireless access solutions
combined with own R& D development programs
SR Telecom has achieved market leadership by adopting a
focused acquisition approach:
swing from Lucent (October 2001)
stride 2400 from Nera (February 2002)
M/ ERGY from ComDev Broadband (January 2003)
Netro (pending, anticipated closing of July 14)
Netro fits SR Telecoms acquisition profile
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Complementing our Market Reach
Lucent WAS
Enlarges customer base with access to markets where SR Telecom was previously absent
Supports strategy for selling and deploying products in Europe
Access to European trade and export financing
Strengthens technology portfolio
Increases R&D capabilities
Contributes to Earnings and Cash Flow from day one
Price: Cdn$2.9 million
Nera
Strengthens
SR Telecoms wireless access solutions portfolio
Positions the Company for first-time growth in the U.S. rural market
Operates in the 2.4 GHz unlicensed frequency band
Complementary patented CDMA technology
DSL speed
Price: US $500,000 plus royalties
Mergy Inc.
CDMA2000 1xEV-DO product line
Standards-based, high-performance broadband capabilities
Delivers peak data rate of 2.4 Mbps using just 1.25 MHz of spectrum
Price: US $635,000 plus royalties
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More than a product company
Full capabilities to provide complete turnkey projects for both urban and rural projects
20+ years experience
Customers in more than 110 countries
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According to Industry research firm Ovum:
DSL is already the number one broadband technology globally
However, DSL will not be able to reach some customers in rural and urban areas alike
In these areas BFWA can help in three ways:
under 10GHz, can reach required distance for rural service
no reliance on the copper network and therefore not reliant on LLU which may not be available in such areas
can also be used for self- backhaul
Significant potential market exists in certain markets - North American and Asian metropolitan centers for urban applications international for rural applications
Filling the Gap between DSL and Fiber
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Growth Drivers
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Consumer and business broadband FWA lines
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Market Focus |
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Rural Market |
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Urban Market |
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Companies* |
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PMP |
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WLL |
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BFWA |
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SR Telecom Inc. |
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Intracom SA. Greece |
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Japan Radio, Japan |
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Airspan Networks Inc. USA |
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Alvarion Ltd, Israel |
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Cape Range Wireless, Australia |
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Harris Corporation, USA |
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SIAE Microelecttronica, Italy |
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Marconi Corporation plc, UK |
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Alcatel, France |
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NEC Corporation, Japan |
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Huawei Technologies, China |
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Excludes companies offering other technologies for rural areas, including fixed cellular, satellite telephone, VSAT
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SR Telecom to Acquire Netro Corp.
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SR Telecom signs definitive agreement to acquire Netro
Addition of AirStar and new generation Angel product lines to solidify SR Telecoms position as the world leader in fixed wireless access products
Recent allocations of 3.5 GHz licenses for voice and DSL- like data services creates large potential market for Angel and Airstar
Significantly strengthens SR Telecoms balance sheet
SR Telecom to seek NASDAQ listing and become SEC registrant
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Consideration is comprised of a dividend (return of capital) of US$ 100 million immediately prior to closing by Netro
SR Telecom will issue American Depository Receipts (ADRs) representing 41.5 million common shares
Netro has 38.5 million shares outstanding and an estimated 1.4 million options that may vest depending on SR Telecom stock price at closing
Consideration per share at closing dependent on the number of Netro options exercised, SR Telecom share price and Cdn/ US$ exchange rate
Netro shareholders will own approximately 43% of SR Telecom
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Consolidated cash at closing will be approximately Cdn$ 75 million
Transaction will provide net cash proceeds of over Cdn$ 20 million to SR Telecom after transaction and restructuring expenses as well as assumed liabilities
SR Telecom anticipates that the acquisition will generate a positive contribution to earnings and cash flow for fiscal 2004
Overall transaction is expected to be neutral to earnings per share in 2004 and accretive to earnings per share in 2005
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Netro Complementing our Portfolio
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Business Case Extending our Broadband
Wireless Solutions
Netros products will comprise an integral part of SR Telecoms wireless offering. Netro supplies SR Telecom with a broadband wireless access system that complements our:
Product portfolio
Industry leadership and established credibility with customers worldwide
Channel to market and customer support capabilities
Angel 1.9- 3.5GHz/ Airstar 3.5- 28GHz
SR Telecom requires product from Netro in order to fulfill customer demand and future growth
By acquiring Netro, SR Telecom secures its supply to these core products
Identified opportunities to pursue new significant contracts we would not otherwise be in a position to pursue
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Business Case Technology Leadership
Netro is viewed as one of the industry leaders in the development of wireless broadband solutions. Netros products have received significant R& D investment:
Netro (and AT& T Wireless) has been an early mover in developing broadband FWA products (since 1996)
Hundreds of millions has been invested in the products
Demand for high- speed data communications and toll quality voice services exists in licensed frequencies in the low (1. 9- 3.5 GHz) and the high (10- 39 GHz) frequencies
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Netros Angel solution has been recognized for its innovation, versatility and quantifiable customer benefits:
FDM, NLOS solution; and
Reliability of service.
Netros Angel and AirStar ensures optimized coverage, capacity and cost for toll- quality voice and scalable high- speed data applications
Netro has a highly- skilled engineering team
The company has also acquired a strong patent portfolio
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Business Case Ease of Integration
SR Telecom has proven its ability to successfully integrate technology teams: Acquisition of the Lucent WAS team in Fall 2001
Telstra relationship solidified
Integration of the Nera Telecommunications R& D team in Spring 2002;
stride2400 development and launch to market
Acquisition of assets of Mergy Inc.
CDMA2000 1xEV- DO market opportunity
Acquisition of Netro
Significantly increases SR Telecoms addressable market into BFWA market
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Business Case - Leveraging Relationships
Rich product portfolio is complemented by unparalleled customer relationships in more than 110 countries
Netros products complement our own product line in terms of frequency and applications
This transaction enables SR Telecom to leverage its global client base and distribution network and further extend our leadership position as the worlds premiere provider of fixed wireless access solutions
Extensive installed base of incumbent carrier customers can migrate to Angel solution without sacrificing their existing infrastructure
Opportunity to pursue significant new contracts we would not otherwise be in a position to pursue
Netros customers and partners will benefit from the merged companys increased service, support and turnkey experience as well as global reach
A new, world- class partner of choice for end- to- end fixed wireless access solutions
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The Netro acquisition offers excellent earnings potential:
Enhanced revenue opportunities
As the leading equipment supplier in the FWA space, SR Telecom will be able to significantly grow its market share
Improved earnings stemming from immediate market opportunities of unrivalled technology and industry leadership
Expected earnings per share accretion by 2005 once Netro is fully integrated into SR Telecoms wireless business
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Business Overview
Revitalized corporate culture
Global reach and customer focused
Accelerating momentum
Business model essentially in place
Lowered cost base
Resizing essentially complete
Core business profitable
Leveraging customer relationships
Expanded markets/ customer base
Won new contracts
Revenues up 28% Y/ Y
Technology portfolio expansion continues
Reduced R& D spending
Boosted technological capabilities through opportunistic acquisitions
R& D process into business- driven process
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Growing the business
Core wireless business continues to improve
Annual revenues in core wireless segment up 28% over 2001
Cash position doubled to $42 M at year end
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Financial Performance Wireless Products
Managing the business
Continued margin improvement to 51% in wireless products from 47% in 2001 as a result of cost reductions and efficiency improvement initiatives
Agent commissions decreased to 8% of sales from 13%
Operating expense increase due to full year impact of Lucent acquisition
R& D increase due primarily to U. S. market product development
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Operating earnings in core business (prior to restructuring costs) at $9. 4 million from $4. 9 million loss in the prior year
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Fourth quarter restructuring charge of $4. 9 M primarily composed of severance taken in anticipation of lower first half 2003 revenues
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