GREENVILLE,Who says the future is bleak for startup communications companies?

NewSouth Communications, a provider of integrated voice and data communications with 29 locations across the Southeast, announced a whopping $62.5 million fourth-round of venture financing on Wednesday.

The VC deal is the largest in the Carolinas and Georgia over the past two years.

Fresh on the heels of Federal Communications Commission decisions that granted continuing most of the access to regional Bell operating company (RBOC) networks and after announcing strong growth in 2002, NewSouth said it is now positioned to hit profitability by mid-2004, said company spokesperson Ashley Creech.

NewSouth said it is on track as a survivor in the brutal telecom wars of recent years. The economic downturn forced many so-called CLECS (competitive access exchange carriers) out of business. The company has raised more than $315 million in venture capital.

“NewSouth is now generating positive operating cash flow each month, and this investment will provide substantial opportunities for accelerated growth and profitability in the future,” said Jim Akerhielm, the company’s president and chief executive officer.

The money will be used to expand its market share in existing markets, add as many as 50 new employees and “for capital expenditures on equipment that we need to purchase to service our customers,” Creech said.

The new positions will be “for various spots, from technical to sales,” Creech added.

NewSouth had been working on the round of financing “since last spring,” she explained. Investors include Kohlberg Kravis Roberts & Company, Wachovia Capital Partners, Vaxa Capital Partners, LP, which had already invested in the company, as well as new investors M/C Venture Partners and Quadrangle Group LLC. KKR is NewSouth’s largest investor.

To accommodate the additional investors, NewSouth’s board was expanded to 12 seats from nine.

In a statement, NewSouth said the money “fully funds NewSouth to profitability.”

NewSouth currently has 750 employees. It generated $156 million in revenues in 2002 with a focus on voice, data and integrated communication package services for businesses.

In reporting earnings for last year, NewSouth said it exceeded cash flow plan by $17 million as overall revenues increased by 25 percent. The company also cut costs by $14.7 million.

NewSouth now provides more than 210,000 phone lines, an increase of 31 percent.

The company has its own backbone crossing the Carolinas, Georgia, Florida, Alabama, Tennessee, Kentucky, Mississippi and Louisiana. It has major hubs in Greenville, Charlotte, Greensboro, Winter Haven, FL., Jacksonville, FL., Atlanta, Birmingham, Mobile, New Orleans, Nashville, Louisville and Destin, FL.

The largest deal in the Carolinas and Georgia last year was $60 million raised by Movaz Networks in Norcross, GA.

NewSouth: www.newsouth.com