FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. 42

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

420 Lexington Avenue, Suite 1718

New York, NY 10170

www.fusiontel.com
Phone: 212-201-2400


OCTQB
Reporting Status - SEC Filer

A/S 300,000.00
O/S 166,432,351

Business Description

Fusion delivers a full range of advanced IP-based services to corporations, consumers and carriers worldwide. Fusion's Efonica-branded VoIP products and services, which focus primarily on Asia, the Middle East, Africa and Latin America, have over one million subscribers from more than 100 countries.


Fusion is an Emerging Leader in Cloud Communications and Cloud Delivered Services, one of the Fastest Growth Areas in the Telecommunications Market Estimated at $3.2 billion and Growing at 36% per Year.


Shift to Focus on Delivering Unified Communications Services to Business Customers Promises to Grow Recurring Revenue as a Portion of Total Revenues, to Increase Margins and to Bring Multi-Year Service Contracts.


High Industry Valuation Multiples in excess of 30x EBITDA for Cloud-Based Telephony Companies Suggest Strong Increases in Fusion Valuation and Share Appreciation.


GNYHA Agreement Names Fusion as the Exclusive Provider of Cloud-base Communications and Other Cloud Information and Security Services to the Greater New York Hospital Association’s +15,000 Members Throughout the US.


Focus on Delivering Vertically-Oriented Cloud-based Solutions to Large Vertical Markets Including Healthcare, Transportation and Education Provides Competitive Advantage, Large Enterprise Sales and Partnership Opportunities.


Recently Announced Acquisition Expected to Produce Approximately +$5 million in positive EBITDA on $74 million in Consolidated Revenues within 2012 Upon Integration and Bring Expanded Infrastructure.


Acquisition of Other Communications or Cloud Service Companies May Leverage the High Valuation Multiples of Cloud-Based Carriers like Fusion.


Use of Commercial Software and Product Platforms and Partnerships with Established Vertical and System Integration Partners Lowers Need for Capex and Speeds Time to Market.


Unique Reach into Corporations, Institutions and Government through Strong Board of Directors and Management Team.




VALUATION

Anticipating the growth in the market, valuations for focused IP communications companies have been established at above market and forward looking levels as evidenced in both the public and private market. The Enterprise Value of 8x8 (NASDAQ: EGHT) was recently 2.99x revenue and 26.99x EBITDA. In recent M&A transactions, one of the leading providers of cloud-based telephony, M5 Networks was acquired by Shoretel, a traditional facilities-based telephony provider, for 3.3x revenue and 45.7x EBITDA.


Another provider of cloud-based telephony, Smoothstone IP Communications, was acquired by West Communications for 3.1x revenue and 38x EBITDA. The Company believes that should such forward looking valuation levels be accorded to Fusion, the Company may gain the ability to leverage its high valuation in acquiring smaller companies at significantly lower valuations and to arbitrage the difference between its own valuation and that of the acquired company.


Fusion’s Strategy

Our strategy is to continue to grow our existing Carrier Services business, which today comprises 95% of our revenue while accelerating the growth of our Corporate Services business to ensure that an increasing portion of our total revenues is derived from the higher margin, more stable and largely recurring Corporate Services business segment . We believe that the Carrier Services business supports the growth of the Corporate Services business by providing enhanced service offerings for our corporate customers, by lowering the overall cost basis of the communication infrastructure shared by the Corporate Services business and by strengthening our relationships with key service providers and carriers throughout the world.


Growth in the Carrier Service business will be driven by expanding the number of international carriers with whom we interconnect; expanding sales to non-traditional carriers, including cable television providers, Internet search engine companies, and large IP telephone companies; and by expanding current carrier relationships to maximize the traffic received from and sent to them.


We intend to generate substantial growth in the Corporate Services segment to make the revenues and margins from this segment a more significant portion of our total revenues and margins. The expansion of the Corporate Services business will come from both organic growth and acquisitions . Organic growth will be delivered from a combination of expanding the number and types of services available and sold to our current customers and by customizing our product and service offerings to address the needs of target large sectors. We believe that there is substantial opportunity to gain market share, to increase the size of our average sale and to sell a broad range of our products by focusing on offering highly targeted product and service solutions to these large sectors including healthcare, transportation and education.

Our strong entry into these markets also leverages our experience and relationships to provide a competitive advantage and offers the opportunity to create sector specific partnerships with incumbent cloud service providers in each sector. Such larger sales to enterprise customers typically have lower churn rates and provide substantial opportunities for adding additional services to a core communications offering. Targeted, “bolt-on” acquisitions are also seen as part of our core strategy , expanding our customer base and providing new prospective customers for our growing portfolio of cloud services; potentially adding products and services to our own; and increasing the scale of our operations while leveraging our existing infrastructure and costs. Such acquisitions may be consummated at lower valuation multiples than would be accorded to Fusion, thus effectively lowering the cost of the acquisition.

Recent Events

The growth strategy of Fusion in terms of both large sale organic growth and growth through acquisition has been evidenced by two recent, announced events.

In January, 2012, Fusion announced that it had entered into an exclusive agreement for cloud services and communications solutions with the group purchasing organizations (“GPOs”) of the Greater New York Hospital Association (GNYHA). Fusion and the GPOs will offer the more than +15,000 GPO members in healthcare and other vertical markets a full range of cloud services, including cloud computing, disaster recovery, storage and security . Through this agreement, Fusion may also provide GNYHA members hosted voice and data solutions that include a full complement of advanced service features, unified communications and presence, Internet and other broadband data services, as well as a comprehensive portfolio of leading edge hardware designed to meet the specific needs of the healthcare industry. These services may be offered directly by Fusion or in partnership with major hardware, software and systems integration partners.

In January, 2012, Fusion announced that it had entered into purchase agreements to acquire the business currently operated by Network Billing Systems, LLC and Interconnect Systems Group II LLC (collectively, “NBS”). The aggregate purchase price for the NBS acquisition transaction is $20 million. NBS currently provides voice (including VoIP) and data telecommunications services, as well as a wide variety of managed and cloud-based telecommunications services, to small and medium sized companies. NBS has approximately 5,000 customers and for FY 2011 generated (unaudited) revenues of approximately $26.8 million and over $3 million in net income (unaudited). The Company expects that as a result of the acquisition of NBS, it will, on a consolidated basis, generate positive EBITDA. In addition to the financial benefits which are foreseen to accrue from the acquisition, Fusion believes this acquisition will accelerate its organic growth plans and provide a compelling platform for future acquisitions.

August, 2012 - FUSION has received a $16.5 Million Debt Investment commitment with VERY Favorable Terms from TWO MAJOR FIRMS to Support the Recently Announced Acquisition.


Our Business

Our business addresses two major segments of the communications market: Carrier Services and Corporate Services.

Our Carrier Services are sold to other communications service providers throughout the world, including U.S. based carriers wishing to terminate transmission of telephone services to international destinations and foreign carriers wishing to terminate in the U.S. and throughout the world. We also purchase domestic and international termination services from many of our carrier customers. We currently have over 270 carrier customers and vendors .

Our Corporate Services segment provides a rapidly growing portfolio of telecommunications’ , cloud communications’ and cloud services to small and medium sized businesses and to large enterprises . These services include local, long distance, and international Voice over Internet Protocol (“VoIP”) services; broadband Internet access; private line circuits; virtual private network services; audio and web conference calling; fax services, and other enhanced communications services and features. These communications services are enhanced and sold with a rich array of cloud-based products including Infrastructure-as-a-Service (IaaS); Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS). Our entire offering is provided within a highly secure framework protecting our customers’ service and information. This spectrum of cloud communication and cloud services, called Unified Communication-as-a-Service (UCaaS) , allows us to deliver voice, data, applications and Internet access services over a single facility, while providing service quality and reliability comparable to that of the historical circuit-switched service providers. We currently serve corporate users in 30 states.

Fusion’s product offerings are designed to capitalize on the rapid growth of cloud-based voice and information services which replaces on-premise equipment based on traditional circuit switched technology including PBX’s and servers with remote services delivered over the internet. Customers switch from legacy, equipment-based communication and information services to cloud based services to take advantage of lower cost of ownership, lower exposure to obsolescence, materially reducing management responsibility and maintenance responsibility, take advantage of a larger range of services and applications available from the cloud, scale as their businesses grow (or contract) without hardware changeouts, and to achieve greater reliability. We are aggressively introducing a broad suite of cloud services, particularly focusing on select, large vertical markets, which address industry-specific customer needs and are not easily duplicated by competitors. These cloud communications and cloud-based information services are being developed primarily through major partners who seek access to the Company’s expertise and its distribution channels.


The Market


Fusion believes that the telecommunications market is at an inflection point as customers ranging from small to enterprise sized switch from premise based equipment to cloud based services. Through this Unified Communications approach, network management and security ; voice and telephony; messaging and presence; conferencing; and applications are delivered through a single facility and managed through the cloud. The transformation offers cloud based telephony companies the ability to gain share rapidly as customers choose new vendors in the sector and offer to increase the average revenue per user (ARPU) by offering an expanding number of communications, communications and security “Apps” and to generate higher overall margins. According to a recent research report, cloud-based telephony services are growing at 36% per year and represent a $3.2 billion market. Cloud based information services for one of Fusion’s target markets, healthcare, is projected by BCC to grow to $17.5 billion by 2016 with 50% of that growth coming from cloud computing.


The market for cloud communications and cloud services, Unified Communications as a Service, is significantly more attractive than the traditional model based on hardware sales. Unified Communications offers a financial model based on high margin recurring revenue and large, multi year sales.

The Executive Management of Fusion consists of :

NEW YORK, NY, Aug 07, 2012 (MARKETWIRE via COMTEX) -- Fusion Telecommunications International, Inc. (OTCBB: FSNN) today announced that Jack Rosen, Chairman of the American Council for World Jewry, Inc., current President of the American Jewish Congress, and founder and Chief Executive Officer of the New York real estate firm, Rosen Partners LLC, has recognized Fusion by joining its Board of Directors. In this capacity, Mr. Rosen will provide counsel to Fusion's management team and advise the company on strategic issues and relationships.

http://www.otcmarkets.com/stock/FSNN/news


Matthew D. Rosen, CEO and Director formerly has served as President of the Northwest and New England Operations for Expanets, a $1.3 billion nationwide roll-up of voice and data networking companies; an investment banker in Merrill Lynch’s corporate finance department; and the Director of Operations for Oxford Health Plans, a $4 billion healthcare company


Gordon Hutchins, Jr., President, Chief Operating Officer , and Acting Chief Financial Officer formerly has served as President and CEO of SwissFone, Inc., a $100 million telecommunications carrier; President and CEO of STAR Telecommunications, Inc., an $800 million international telecommunications carrier


Jan Sarro, Executive Vice President - Corporate Services formerly has served as President of the Americas for Viatel where she grew annual carrier revenues from $20 million to $160 million in under two years, and built a $140 million sales organization. She also held senior executive marketing and sales management positions at Argo Communications, FTC Communications, TRT Communications, and WorldCom


The Board of Directors of Fusion consists of :


Marvin S. Rosen, Chairman of the Board : Mr. Marvin Rosen co-founded the Company in 1997. He formerly served as a name partner at Greenberg Traurig; Finance Chairman under President Clinton; and Chairman of the Florida Housing Finance Agency. Mr. Rosen served on the Board of Directors of Terremark Worldwide, Inc until its acquisition in 2011 by Verizon


Matthew D. Rosen : see above


E. Alan Brumberger : Formerly Managing Director Drexel Burnham, Managing Director of Shearson American Express, and President and CEO of Shearson’s international Investment Banking business


Philip D. Turits (Treasurer ) : Former Treasurer of Larry Stuart, CEO of Continental Chemical Company


Michael J. Del Giudice : Board member of Con Edison and former board member of Barnes and Noble; formerly Chief of Staff for Mario Cuomo and General Partner at Lazard Freres


Julius Erving : Formerly board member of Saks, Willtel, Darden Restaurants, Sports Authority, NBC and member of NBA


William Rubin : President of the Rubin Group, a Florida based lobbying firm. Formerly Assistant Insurance Commissioner and Treasurer of the State of Florida, advisor to many large companies, including health care companies active in Florida


Paul C. O’Brien : Former President and Chairman of New England Telephone (Nynex), Advisor to Sovereign Bank


Larry Blum : Former Senior Partner of the Florida Region of Marcum LLP (Marcum Rachlin), Managing Partner of Rachlin LLP, litigation advisor and member of the Florida Bar


Jack Rosen : CEO of Rosen Partners, Hudson Institute Board Member, Chairman of the American Jewish Congress


The Advisory Board of Fusion consists of:


John H. Sununu : Former three term Governor of New Hampshire, Chief of Staff for President Bush and Counselor to the President


Fred Salerno : Board member of CBS, Viacom, Popular Inc., Intercontinental Exchange and Akamai, Former Vice Chairman and CFO for Verizon


Ken Sunshine : Founder and Partner of Sunshine Sachs, providing public relations services to Fortune 500 corporations, labor unions, and political figures and to some of the biggest household names in the entertainment, music, and sports industries


Tonio Burgos : Former Director of Executive Services for the Governor of New York, Commissioner of the Port Authority of NY and NJ, Director of the Path Commuter Rail System, Vice Chairman of the NJ Economic Development Authority and a member of the School Construction Corporation


Vice Admiral Al Konetzni , USN (ret): Commissioned in 1966 and served through 2004. Currently serves on the Boards of Simulex, Larry King Cardiac Foundation, Tompkins Builders, American Shipbuilding Suppliers Association, Pennsylvania State University Applied Research Laboratory

WORTH REPEATING ..... FOR ANYONE LOOKING INTO FSNN!