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Axia NetMedia Corporation

Managements Discussion & AnalysisFor the year ended December 31, 2013

March 10, 2014

Unless otherwise indicated, all financial information presented in this Managements Discussion & Analysis (MD&A), including tabular amounts, is in Canadian

dollars, and has been prepared in accordance with International Financial Reporting Standards (IFRS).

The MD&A is designed to provide the reader with a greater understanding of Axias business, our strategy and performance, our expectations of the future,

and how we manage risk and capital resources. It is intended to enhance the understanding of Axias audited consolidated financial statements and related

notes for the fiscal years ended December 31, 2013 and 2012, and should therefore be read in conjunction with those documents. Additional informationrelating to Axia, including our Annual Progress Report and Annual Information Form for the fiscal years ended December 31, 2013 and 2012 are available on

SEDAR at www.sedar.com.

Reference in this MD&A to Axia, we, us, our and Corporation means, as the context may require, Axia NetMedia Corporation and all or some of Axias

subsidiaries.

WHERE TO FIND:

SUMMARY OF CONSOLIDATED FINANCIAL RESULTS ............................................................................................ 2AXIA OVERVIEW ............................................................................................................................................. 3KEY METRICS ................................................................................................................................................. 5STRATEGY AND OUTLOOK ................................................................................................................................ 6BUSINESS UNIT RESULTS AND ANALYSIS .......................................................................................................... 7FINANCIAL DISCUSSION AND ANALYSIS .......................................................................................................... 13SIGNIFICANT ACCOUNTING POLICIES ............................................................................................................. 17NON-GAAP ACCOUNTING MEASURES ............................................................................................................... 20DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING .............................................. 20TRENDS, EVENTS, RISKS AND UNCERTAINTIES ................................................................................................ 21

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SUMMARY OF CONSOLIDATED FINANCIAL RESULTS

2013 HIGHLIGHTS

Business unit revenue of $110.0 million grew 17% year over year. Business unit EBITDA of $29.5 million was up 34% from $22.0 million in 2012. EBITDA margin expanded to

27% in 2013 from 23% in 2012.

IFRS net income of $1.9 million or $0.03 per share compared to $6.2 million or $0.11 per share for the prioryear. Net income, excluding the adjustments related to the sale of investments, the non-cash expenses inCorporate and the change in tax estimate was $7.8 million or $0.12 per share.

Axia completed the sale of its interest in OpenNet and in Xarxa Oberta for total proceeds of $39.0 million. In Alberta, Axia extended a key contractual relationship with the Government of Alberta through to June 30,

2018 and simplified its historically complex relationship with Bell into a standard commercial relationship.

Cash and investments were $38.8 million at December 31, 2013 compared to $2.3 million a year ago. On January 6, 2014, Axia declared an initial quarterly dividend of $0.0125 per share. On March 7, 2014, Axia entered into a termed credit agreement of up to $20.0 million with a current

indicative fixed rate of less than 4% to finance capital expenditures associated with its strategic growth plan.

Q4 2013 HIGHLIGHTS

Business unit revenue of $31.5 million grew 28% from $24.6 million in Q4 2012. Business unit EBITDA of $8.1 million was up 12% year over year. IFRS net loss of $2.0 million or $(0.03) per share compared to a loss of $2.9 million or $(0.03) per share for

the prior year. Excluding the adjustment related to the change in tax estimate, net loss was $0.2 million or$0.00 per share.

Customer connections of 9,328 grew 10% from 8,512 in Q4 2012. Covage continues to generate positive results. As a result, during the quarter Covage made its first annual

cash interest payment of $2.8 million to Axia.

BUSINESS UNIT RESULTS

The business unit review in this MD&A reflects those operations where Axias executive team is actively involved in theoperational management of the business including strategy setting, approval of operating and financial plans, keypersonnel appointments, compensation decisions and ongoing monitoring of performance. As a result 100% of thefinancial and operational results of Axia North America and Covage are included in the business unit review. Furtherdetails on the business units are included in note 2 of the consolidated financial statements for December 31, 2013.

During 2012, the Corporation changed its fiscal year end from June 30, 2012 to December 31, 2012. Due to thechange, the financial information below has been adjusted to reflect the unaudited twelve month period for 2012. Thechange was done to facilitate the reading and comparison of information to the results presented as at December 31,2012. Included on page 14 is an analysis comparing the reported fiscal years.

2013 2012 2011 2010

Business Unit Results ($000s)

NGN Services revenue 98,541 83,908 80,063 67,562

Total revenue 109,995 94,110 95,965 86,786

Expenses 80,465 72,081 76,299 73,422

EBITDA1 29,530 22,029 19,666 13,364

Depreciation and amortization 23,797 20,041 18,667 16,413

BU Operating income 5,733 1,988 999 (3,049)

IFRS ($000s)

Net income 1,870 6,872 4,941 5,993

Earnings per share 0.03$ 0.11$ 0.08$ 0.09$

Total cash 38,758 2,112 11,065 12,135

Total assets 135,044 126,166 113,552 105,785

Total loans payable 2,287 1,625 - -1Refer to "Non-GAAP measures" on page 20

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AXIA OVERVIEW

Axia owns, operates and sells services over fibre optic communications networks.

For over a decade, Axia has focused its business in areas where access to high bandwidth fibre infrastructure does notexist. Our success has been driven by our ability to deliver networks that provide our customers with increasedchoice, and provide communities with a reliable infrastructure and resultant economic benefit. Axia is focused onproviding services to customers in communities in Alberta and France.

Axia delivers a distinctive value proposition to the market and the success of our approach is evidenced by ourgrowing footprint and increasing usage of our networks. Our goal is to be a dominant provider of digital transportservices delivered over high performing fibre optic networks, in the regions we operate.

Focus on fibre transport connectivity: Axias focus is on delivering the highest quality and most affordable digitaltransport services freeing our customers to choose the web services which best meets their needs.

Support public policy, deliver infrastructure and increase competition in under-served regions: Axia fosterscompetition by separating the network from the services provided over that network, thereby increasing thecustomers choice of services and providers. Unlike the traditional telco model, Axias approach creates a valuechain of industry players that each excel at delivering their core competency. The result is a transformation tomarkedly improved performance and service, lower cost and increased choice of services and providers for endusers.

Leverage government grants and committed spend: in delivering its infrastructure and services within asustainable framework, Axia has demonstrated the ability to leverage government grants and committed spend,

in addition to deploying its own capital, to create an effective and sustainable economic model.

Axias priority is to drive long-term, sustainable earnings growth by increasing market penetration.

With our established market position, Axia is focused on the following strategic imperatives:

Bringing new services to market: to increase the use of our networks we invest in state of the art electronics,operating and business systems to introduce next generation services to meet customer demands;

Connecting new customers to our networks: we increase the penetration of our addressable market throughconnecting enterprises and government sites, wireless towers and selective Fibre to the Home (FTTH) initiatives;and

Selectively expanding our network footprint: we invest in our existing geographic regions to expand ouraddressable market in ways that make commercial sense. We also manage investment in and disposition ofnetworks to ensure our unique value proposition is recognized and the ongoing growth opportunity is attractive ona risk-adjusted basis.

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Jurisdiction: North America: Alberta,Canada

North America: WesternMassachusetts, USA

France

Name: Axia Axia USA CovagePrimaryServices:

Bandwidth BandwidthDark fibre

BandwidthDark fibre

Network Status: Operational Construction Operational

Axia Ownership: 100% 100% 50%

Network Activation: 2005 2014 2010

Fibre length: 13,000 kms 2,150 kms 8,530 kmsHeadcount: 126 5 131CustomerConnections

4,761 16 4,379

InfrastructureReplacement Cost

$380.0 million Under construction $290.0 million

Axias Investment $40.0 million $0.4 million $90.0 million

Operating Structure Combination of owned fibrenetworks and operatingagreements with theGovernment of Alberta. Theend of the current term onthe operating agreement isJune 30, 2018

Operating agreement withthe state is a renewable tenyear licence initial termends in 2023

Combination of ownedfibre networks andconcession agreementswith regional communitieswith terms of varyinglengths (from 15 years to25 years) with termsending from 2019 to 2037

Financial Reporting: Consolidation Consolidation Equity accounting

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KEY BUSINESS UNIT METRICS

Customer connections grew to 9,328 at December 31, 2013, up 10% from 8,512 a year ago.

NGN Services revenue was $98.5 million for the year, up $14.6 million or 17% over the same period last year. Forthe fourth quarter, NGN Services revenue totalled $27.3 million up 22% over the same period last year.

$22,921 $23,488$24,810

$27,322

$83,908

$98,541

$75,000

$80,000

$85,000

$90,000

$95,000

$100,000

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Q1 Q2 Q3 Q4 2012 2013

NGN Services revenue

2012

2013

EBITDA for 2013 totalled $29.5 million, up 34% from $22.0 million a year ago. EBITDA totalled $8.1 million for the

quarter compared to $5.9 million for the same quarter last year.

$6,881$7,530

$7,029$8,090

$22,029

$29,530

$0

$10,000

$20,000

$30,000

$40,000

$-

$2,000

$4,000

$6,000

$8,000

$10,000

Q1 Q2 Q3 Q4 2012 2013

EBITDA

2012

2013

EBITDA is a Non-GAAP measure and is calculated on page 20, Non-GAAP Measures.

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STRATEGY AND OUTLOOK

Axia's goal is to gain market share in regions we currently operate in. To achieve this goal, Axia invests in networkinfrastructure and operating teams in order to build and expand its footprint and connect customers. Axia seesattractive growth opportunities in North America and France and has $40.0 million of cash and has established a$20.0 million capital expenditure facility in order to take advantage of these opportunities.

In Alberta, Axia is planning two strategic fibre investments to support the ongoing delivery of high quality fibre

services to its existing customers and position the business for growth. Axia has begun to build a communityinterconnect fibre grid so that it can offer services to the private sector in all Alberta communities. This project isscheduled for completion over the next 12-18 months and will be funded by the $20.0 million capital expenditurefacility. In addition, Axia has set aside approximately $10.0 million of its cash on hand to be deployed over thenext two years to build, in select locations, the local fibre connections for its Fibre-to-the-Premise (FTTP)initiative. This project would deliver FTTP to underserved markets where reasonable levels of market adoptionwould achieve acceptable financial returns.

In France, Covage has emerged as the leading independent, pure-play fibre operator in the French market and Axiaplans to capitalize on this position. In addition to continued growth within its existing network footprint, Covage isactive on several bids for new networks. Given the success Covage has had to date growing its business and thefavourable operating and regulatory environment in France, Axia has set aside $20.0 to $30.0 million of its cash onhand over the next four years to help fund potential wins and acquisitions that adhere to its strict financial returncriteria.

As part of its ongoing effort to maximize shareholder value on January 6, 2014, Axia declared an initial quarterly

dividend of $0.0125 per share. In addition, on December 12, 2013, Axia renewed its Normal Course Issuer Bid.These decisions reflect Axia's confidence in its ability to generate ongoing cash flow, its prospects for growth and adesire to broaden its pool of potential shareholders.

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BUSINESS UNIT RESULTS AND ANALYSIS

BUSINESS UNIT REVENUE

Quarterly revenue increased $7.0 million or 28% to $31.5 million over the same quarter last year primarily due toCovages growing customer connections. Covages revenue grew 47% over the same quarter last year to $18.4million. North America grew revenue 9% over the same quarter last year to $13.1 million driven by demand forincreased bandwidth.

Revenue for 2013 totalled $110.0 million, up 17% over last year reflecting growth in both business units. Covageincreased revenue by $13.5 million or 29% over last year due to network expansion and increased marketpenetration. North America increased revenue by 5% or $2.4 million over last year due to increased customerdemand for higher bandwidth and connection services.

BUSINESS UNIT EXPENSES

Operating and selling general and administration (SG&A) expenses for the quarter were $23.4 million, an increaseof $4.7 million or 25%. Our growing fibre based services continue to be leveraged off a relatively fixed cost

structure. Included in North Americas expenses are costs associated with the early stage operations of newbusiness in Massachusetts of $1.0 million for Q4 2013, up $0.1 million from the same period last year. Expensesare up in North America due to increased fees to Bell of $0.5 million. In Covage, expenses have increased 42%over the same quarter last year. This increase is primarily attributable to variable costs associated with increasedDSL revenue in a regional network in Covage and incremental costs associated with deploying our new communitynetworks.

Expenses for the twelve month period totalled $80.5 million, up 12% over 2012 primarily due to networkexpansion in Covage, and increased fees to Bell in North America of $1.1 million.

BUSINESS UNIT EBITDA

EBITDA totalled $8.1 million for the quarter compared to $5.9 million for the same quarter last year. The EBITDAmargin in North America remains consistently high at 33%. Covage has improved operating leverage and theEBITDA margin increased from 26% to 29% over the same quarter last year.

EBITDA in 2013 totalled $29.5 million, up $7.5 million or 34% from the same period last year. Covage has

experienced significant growth with the twelve month periods growth rateat 69% while North America remains

relatively consistent.

($000s) Q4 2013 Q4 2012 $ % 2013 2012 $ %

North America 13,110 12,044 1,066 9 50,036 47,661 2,375 5

Covage 18,394 12,507 5,887 47 59,959 46,448 13,511 29

TOTAL 31,504 24,551 6,953 28 109,995 94,110 15,885 17

Three Months Ended Change Twelve Months Ended Change

($000s) Q4 2013 Q4 2012 $ % 2013 2012 $ %

North America 8,498 7,741 757 10 30,502 28,381 2,121 7

Covage 13,148 9,256 3,892 42 42,632 36,188 6,444 18

Corporate 1,768 1,679 89 5 7,331 7,512 (181) (2)

TOTAL 23,414 18,676 4,738 25 80,465 72,081 8,384 12


($000s) Q4 2013 Q4 2012 $ % 2013 2012 $ %

North America 4,612 4,303 309 7 19,534 19,280 254 1

Covage 5,246 3,251 1,995 61 17,327 10,260 7,067 69

Corporate (1,768) (1,679) (89) (5) (7,331) (7,512) 181 2

TOTAL 8,090 5,875 2,215 38 29,530 22,029 7,501 34

EBITDA is a Non-GAAP measure and is calculated on page 20, Non-GAAP Measures.


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QUARTERLY BUSINESS UNIT RESULTS

NGN Services revenue has been growing steadily to this quarters high of$27.3 million, an increase of 22% or $4.9million over the same quarter last year. This growth is due to Covages continued strong performance as well ascontinued growth in North America as market penetration increases in both Business Units. Total revenue reachedthis quarters high of $31.5 million, up 28% over the same period last year.

EBITDA totalled $8.1 million, up $2.2 million or 37% over the same quarter last year. This is primarily due to

strong operating leverage in Covage.

Operating income has fluctuated over the past five quarters and continues to trend upwards.

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1


NGN Services revenue 27,322 24,810 23,488 22,921 22,408 20,959 19,912 20,629

Total revenue 31,504 26,521 26,721 25,249 24,551 23,941 22,769 22,849

EBITDA1 8,090 7,029 7,530 6,881 5,875 6,167 5,178 4,809

Depreciation and amortization 7,039 5,867 5,447 5,444 5,457 4,927 4,816 4,841

BU Operating income 1,051 1,162 2,083 1,437 418 1,240 362 (32)

IFRS ($000s)

Net income (2,024) (2,262) (361) 6,517 (2,382) 3,207 611 5,437

Earnings per share (0.03)$ (0.03)$ (0.01)$ 0.10$ (0.03)$ 0.05$ -$ 0.09$

Total cash 38,758 6,618 1,781 4,802 2,112 1,234 6,768 5,809

Total assets 135,044 128,635 133,036 135,610 126,166 124,040 118,366 117,527

Total loans payable 2,287 2,446 2,019 2,198 1,625 1,671 - -1Refer to "Non-GAAP measures" on page 20

2013 2012

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AXIA NORTH AMERICA

Axia North America includes the operations of subsidiaries in Alberta and Western Massachusetts. In Alberta, Axiasells lit fibre services over a province-wide network to government, commercial and retail service providercustomers. In Western Massachusetts, Axia has begun to sell lit and dark fibre services over a 2,153 km networkto enterprise, government, and small and medium-sized businesses.

In the last year, North American operations grew revenue and began positioning itself for a period of growth,slightly impacting operating income.

Axia North America revenue growth is achieved by proactively connecting new customers and developing andselling services which meet customer needs for greater bandwidth usage. NGN Services revenue grew 6% over thesame quarter last year to $12.0 million for the quarter. Total revenue is up $1.1 million or 9% over the samequarter last year to $13.1 million. For the twelve month period, total revenue is up 5% to $50.0 million.

The Bell Facility Fee amounted to $0.7 million for Q4 2013 compared to $0.3 for the same quarter last year. For2013, the Bell Facilities Fee totalled $1.9 million compared to $0.8 million for the prior year. This fee is expectedto grow in relation to increasing revenue. Commencing on July 1, 2015, the Bell Facility Fee will be replaced by alocal access services agreement at a cost of $6.0 million per year for current services and is adjustable for anincrease in services purchased.

EBITDA was $4.6 million for the quarter, up 7% over the prior period as expense growth was marginally lower thanrevenue generation. EBITDA for the twelve month period totalled $19.5 million, up 1% over the prior period.

Capital expenditures for Q4 2013 totalled $3.9 million related to continued investment in business systems andnetwork electronics to enable Axia to efficiently and quickly bring to market and support a growing volume of new

services. In addition, Axia is working with communities and enterprise customers to facilitate direct FTTPconnections to the province-wide network.

Axia brings innovation and competition to the market. The Corporation recently extended a key contractualrelationship with the Government of Alberta through to June 30, 2018 and simplified its historically complexrelationship with Bell into a standard commercial relationship. Axia is planning strategic f ibre investments tosupport the ongoing delivery of high quality fibre services to its existing customers and position the business forlong term growth.

Community Interconnect Fibre Grid:Axia has begun a project to deploy fibre and related electronics so that itcan offer services to customers in all Alberta communities and operate what it believes to be the mostcomprehensive, high quality and resilient fibre network interconnecting communities in the province. This province-

2013 2012 2011 2010

Business Unit Results ($000s)NGN Services revenue 46,077 43,755 43,227 44,466

Total revenue 50,036 47,661 52,088 55,093

EBITDA1 19,534 19,280 20,607 24,928


Operating income 16,636 16,993 19,062 23,041

IFRS ($000s)

Net income 15,667 17,255 18,699 22,177

Total assets 33,220 27,197 18,288 14,4231Refer to "Non-GAAP measures" on page 20

Q4 2013 Q4 2012 $ % 2013 2012 $ %


NGN Services revenue 11,966 11,316 650 6 46,077 43,755 2,322 5

Total revenue 13,110 12,044 1,066 9 50,036 47,661 2,375 5

EBITDA1 4,612 4,303 309 7 19,534 19,280 254 1

Depreciation and amortization 731 675 56 8 2,898 2,287 611 27

Operating income 3,881 3,628 253 7 16,636 16,993 (357) (2)

KPIs

Retail service providers 95 87 8 9

Active customer connections 4,804 4,619 185 4

C apital expenditures ($000s) 3,895 1,897 1,998 105 8,973 15,694 (6,721) (43)

IFRS ($000s)

Net income 1,730 3,795 (2,065) (54) 15,667 17,255 (1,588) (9)

Total assets 33,220 27,197 6,023 221Refer to "Non-GAAP measures" on page 20

Three Months Ended Change ChangeTwelve Months Ended

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wide network will allow Axia to offer its services to private sector customers in communities where Axia has beenproviding services solely to Government of Alberta (GoA) customers. This project is scheduled for completion overthe next 12-18 months. Subsequent to year end, Axia established a credit facility of $20.0 million to fund this fibrebuild.

Fibre-to-the-Premise:Axia has set aside $10.0 million cash to be deployed over the next two years to fund, inselect locations, the local fibre connections of a FTTP initiative. This project would deliver FTTP to underservedmarkets where reasonable levels of market adoption would achieve acceptable financial returns. The related

addressable FTTP market revenue opportunity is $225.0 to $275.0 million per annum.

The strategic fibre investment coupled with continuing investments in network electronics and Axia's operating andbusiness support systems positions the Corporation to address a large FTTP opportunity across the province.Existing and future customers will benefit from Axia's ability to deliver the highest quality, scalable, flexible andattractively priced fibre-based services.

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COVAGE

In France, Covage sells services over a fibre network that includes 19 regional segments connected to a 3,700 kmfibre backbone. Covage sells lit and dark fibre services to enterprise, government, small and medium-sizedbusinesses and residential end users.

Over the last four years, Covage has increased revenue from $31.7 million to $60.0, a cumulative annual growthrate of 53%. EBITDA grew from $0.3 million to $17.3 million, an average of $5.6 million per year. Covagecontinues to leverage its operations increasing their EBITDA/Revenue ratio from 1% to 33%.

NGN Services revenue for the quarter increased $4.3 million or 38% over the same quarter last year to $15.4million. This is reflective of the continuing growth in customer connections and services. Total revenue for thequarter increased $5.9 million or 47% over the same quarter last year to $18.4 million. In 2013, NGN Servicesrevenue grew $12.3 million or 31% to $52.5 million. Total revenue for the twelve month period grew 29% to $60.0million. Included in NGN Services are bandwidth, dark fibre, wireless and wholesale DSL services.

Compared to last year, EBITDA increased $2.0 million or 61% to $5.2 million. For the twelve month period, EBITDAis up 69% to $17.3 million compared to 2012. EBITDA has increased significantly as the network infrastructure isleveraged by gaining more customers with limited increase to operating costs.

Operating income grew 31% over the same period last year with a resulting loss of $1.1 million compared to a loss

of $1.5 million for the same quarter last year. 2013 operating income grew 52% to a loss of $3.6 million over theprior year.

Capital expenditures for the period totalled $8.4 million up 60% over the same period last year. Two-thirds of thequarterly capital expenditure relates to connecting new customers to the network, increasing market penetration.The remainder relates to construction of new networks, previously announced.

Covage continues to generate positive results. Axia, as a 50% shareholder of Covage, anticipates further growthas it increases penetration of the French market. Annual interest payments on loans advanced by its shareholdersare being covered by Covage's cash flow. The first interest payment of $2.8 million was received in December2013.

2013 2012 2011 2010


NGN Services revenue 52,464 40,153 36,836 23,096

Total revenue 59,959 46,448 43,877 31,693EBITDA1 17,327 10,260 7,765 271


Operating Income (3,572) (7,494) (9,081) (13,909)

IFRS ($000s)

Axia's share of net income (loss) (2,053) (8,063) (1,305) (1,087)Axia's book value of investment in

Covage 60,535 52,067 51,946 65,8491Refer to " Non-GAAP measures" on page 20

The Business Unit Results in the table above and discussion below include 100% of Co vages o perations. The

IFRS results include Axia's 50% ownership under equity accounting.

Q4 2013 Q4 2012 $ % 2013 2012 $ %


NGN Services revenue 15,356 11,092 4,264 38 52,464 40,153 12,311 31

Total revenue 18,394 12,507 5,887 47 59,959 46,448 13,511 29

EBITDA1 5,246 3,251 1,995 61 17,327 10,260 7,067 69

Depreciation and amortization 6,308 4,782 1,526 32 20,899 17,754 3,145 18

Operating Income (1,062) (1,531) 469 31 (3,572) (7,494) 3,922 52

KPIs

Retail service providers 150 116 34 29

Active customer connections 4,524 3,893 631 16

C apital expenditures ($000s) 8,412 5,263 3,149 60 28,350 14,961 13,389 89

IFRS ($000s)

Axia 's share of net income (loss) (690) (7,538) 6,848 91 (2,053) (8,063) 6,010 75Axia's book value of investment

in Covage 60,535 52,067 8,468 161Refer to "Non-GAAP measures" on page 20

The Business Unit Results in the table above and discussion below include 100% of Covages operations. The IFRS results

include Axia's 50% ownership under equity accounting.

Three Months Ended Change ChangeTwelve Months Ended

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Covage has emerged as the leading independent, pure-play fibre operator in the French market and is nowfocusing on the following growth strategies.

Growth within Existing Network Footprint:Over the next three to five years, Axia expects Covage to increaseits market penetration to 15 to 20%, from 10.3% currently. Axia expects a high proportion of incremental revenueto flow through to EBITDA as its cost base should not increase significantly unless the business expands by winningnew bids. Covage is free cash flow positive before growth capital investments.

Potential New Contract Wins: Covage is active on several bids for new network contracts.This pipeline is beingdriven mostly by the Federal Governments initiative to broadly deploy FTTH beyond the high density areas whereincumbents have committed to deploy FTTH. Given the success Covage has had to date growing its business andthe favourable operating and regulatory environment in France, Axia has set aside $20.0 - $30.0 million of its cashon hand over the next four years to help fund potential Covage contract wins.

Deployment of this cash is contingent upon Covage successfully winning bids that adhere to its strict financialreturn criteria. While there is no certainty with respect to the timing and magnitude of such wins, Covages currentbid pipeline could represent an increase in the addressable market of approximately 40,000 enterprises and900,000 homes. If Covage is successful in winning these bids, it would be incremental to the existing business andcould result in an increase over Covages 2013 revenue and EBITDA of 100% - 200% over the next 5 to 10 years.This timeframe takes into account the time to build and commission the new networks and then grow marketpenetration to reasonable levels.

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FINANCIAL DISCUSSION AND ANALYSIS

ANNUAL RESULTS

QUARTERLY RESULTS

REVENUE

Axia generates revenue from two sources: NGN Services and Connection Services. NGN Services are network-based services that are recurring and include fibre access fees, bandwidth services, value-added services and othercomplementary related services. Connection Services are services that connect new customers to our networksand include project work related to network design, construction, and network change, and other connectionservices activities. Due to the nature of these services, revenue from Connection Services tends to fluctuatequarter by quarter.

NGN Services revenue for Q4 2013 increased 6% or $0.7 million over the same quarter last year from $11.3million to $12.0 million. Connection Services revenue increased $0.4 million to $1.1 million compared to the samequarter last year. Connection Services revenue can be expected to fluctuate period over period depending on thelevel of construction and activation activity being undertaken during any quarter. Total revenue for Q4 2013 was$13.1 million compared to $12.0 million for the same quarter last year. For the twelve month period, total revenuegrew $2.4 million or 5% to $50.0 million.

EXPENSES

Operating expenses

Operating expenses for the quarter were $6.7 million compared to $6.8 million, down 2% or $0.2 million over thesame quarter last year. For 2013, operating expenses have increased $1.1 million or 5% to $26.4 million due toan increase in fees associated with the revenue share with Bell in North America.

($000s except per share amounts) 2013 2012 2011 2010

IFRS Results

Total revenue 50,036 47,661 52,308 55,093

Operating income 7,252 1,418 7,914 9,325

Net income attributable to commonshareholders 1,870 6,872 4,941 5,993

Net income per share 0.03$ 0.11$ 0.08$ 0.09$1Refer to "Non-GAAP measures" on page 20

($000s except per share amounts) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

IFRS Results

NGN Services revenue 11,966 11,779 11,286 11,046 11,316 10,655 10,789 10,995

Total revenue 13,110 12,319 12,465 12,142 12,044 12,393 11,532 11,692

Operating expenses 6,658 6,212 7,219 6,339 6,818 6,022 6,486 5,963

Selling, general and administration 3,608 3,136 2,384 2,277 2,602 3,066 2,477 2,459

Axia's share of loss (income) in Covage 690 401 462 500 7,538 797 2,114 (2,386)

EBITDA1 2,154 2,570 2,400 3,026 (4,914) 2,508 455 5,656

Depreciation and amortization 731 712 730 725 675 644 543 425Operating income 1,423 1,858 1,670 2,301 (5,589) 1,864 (88) 5,231

Axia's share of (loss) income in OpenNet - (3,706) (1,291) 3,160 2,969 2,196 1,907 951

Gain on disposal of Xarxa Oberta 239 1,059 - - - - - -

Gain on disposal of property - - - 1,660 - - - -

Net income before income taxes 1,500 (640) 371 7,079 (2,631) 4,030 1,699 6,187

Net income (2,024) (2,262) (361) 6,517 (2,382) 3,207 611 5,437

Net income per share (0.03)$ (0.03)$ (0.01)$ 0.10$ (0.03)$ 0.05$ -$ 0.09$1Refer to "Non-GAAP measures" on page 20

20122013

($000s) Q4 2013 Q4 2012 $ % 2013 2012 $ %

IFRS Results

NGN Services 11,966 11,316 650 6 46,077 43,755 2,322 5

Connection Services 1,144 728 416 57 3,959 3,906 53 1

Total revenue 13,110 12,044 1,066 9 50,036 47,661 2,375 5


($000s) Q4 2013 Q4 2012 $ % 2013 2012 $ %

Operating 6,658 6,818 (160) (2) 26,428 25,289 1,139 5

Selling, general and administration 3,608 2,602 1,006 39 11,405 10,604 801 8

Total 10,266 9,420 846 9 37,833 35,893 1,940 5


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Selling, General and Administration expenses

SG&A expenses for the quarter were $3.6 million compared to $2.6 million, up 39% or $1.0 million over the samequarter last year. For the twelve month period, SG&A expenses have increased $0.8 million or 8% to $11.4million. This increase relates to: 1) increased personnel costs in North America related to the restructuring of thebusiness unit into customer units; and 2) fees related to the sale of investments and non-cash expenses inCorporate of $0.9 million.

EQUITY SHARE OF INVESTMENT IN COVAGE

Axias share of the loss from our 50% interest in Covage was $0.7 million for the quarter compared to $7.5 millionfor the same quarter last year. Operational results have been steadily improving in Covage as they gain marketshare and execute on their strategy.

Axias accounting for the Covage business unit changed from proportionate consolidation to equity accounting dueto the adoption IFRS 11, Joint arrangements on January 1, 2013. The financial results of Covage are now reportedon the income statement and balance sheet as an equity accounted joint venture. See the Corporationsconsolidated financial statements for further details.

OPERATING INCOME

Operating income totalled $1.4 million for the quarter, up $4.2 million over the same quarter last year. For thetwelve month period, operating income increased $5.8 million to $7.3 million. The increase in both periodsprimarily relates to improving operating results in Covage.

NET INCOME BEFORE TAXES

Net income before tax totalled $1.5 million for Q4 2013 compared to a loss of $2.6 million for the same quarter lastyear. For the twelve month period net income before tax totalled $8.3 million compared to $9.3 million for 2012.

INCOME TAXES

As is typical of NGN Networks in the early activation phase, Axias operations in Western Massachusetts arecurrently incurring non-capital start-up losses. The benefit of these non-capital losses is recognized as a deferredtax asset when it is probable that they will be utilized in future accounting periods and can be reliably measured.Consistent with the approach taken with Covage, Axia has decided to only recognize the benefits of tax lossesexpected to be utilized over a forecasted five year period. This change in estimate resulted in a decrease in incomeof $1.8 million in the current quarter.

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

Quarterly net income has increased by $0.4 million, from a loss of $2.4 million, to a loss of $2.0 million. Thedecrease in North America is primarily due to a change in estimate related to future tax benefits in our USoperations. France continues to grow steadily. During the twelve month period, Axiasinvestment in OpenNet wassold resulting in an impairment of $4.4 million. Net income for 2013 was $1.9 million or $0.03 per share ascompared to $6.9 million or $0.11 per fully diluted share for 2012. This decrease is primarily due to the accountingimpairment of the sale of OpenNet in 2013 compared to profits earned in 2012 of $8.0 million partially offset byimproving profits earned on France by Covage.

ANNUAL RESULTS FOR THE LAST TWO FISCAL PERIODS

During 2012, Axia changed its fiscal year end from June 30, 2012 to December 31, 2012. As a result, comparativeperiod is a six month fiscal year from July 1, 2012 to December 31, 2012. Below is an analysis comparing thereported fiscal years.

NGN Services revenue for the six months ended December 31, 2012 was $24.4 million compared to $50.9 millionfor the twelve months ended December 31, 2013. Average quarterly NGN Services revenue for the six month

($000s) except per share amounts Q4 2013 Q4 2012 $ % 2013 2012 $ %

IFRS Results

North America 1,730 3,795 (2,065) (54) 15,667 17,253 (1,586) (9)

Covage (2,228) (7,706) 5,478 (71) (4,141) (8,413) 4,272 (51)

OpenNet - 2,969 (2,969) (100) (1,836) 8,023 (9,859) (123)

Xarxa Oberta - 145 (145) (100) 1,104 (602) 1,706 (283)

Corporate (1,527) (1,585) 58 (4) (8,924) (9,389) 465 (5)

Total (2,024) (2,382) 358 15 1,870 6,872 (5,002) (73)

Net income per share (0.03)$ (0.03)$ -$ - 0.03$ 0.11$ (0.08)$ (73)


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period was $12.2 million compared to a quarterly average of $12.7 million for the twelve months ended December31, 2013.

Total expenses for the six months ended December 31, 2012 were $19.8 million compared to $41.6 million for thetwelve months ended December 31, 2013. Average quarterly operating expense for both the six month period andthe twelve month period was consistent, at approximately $10.0 million per quarter reflecting the leveling off ofexpenses as critical mass has been reached in our fully activated regions.

Operating income totalled $7.3 million for the twelve months ended December 31, 2013 compared to a loss of $3.7million for the six months ended December 31, 2012. Operating income as a percentage of revenue has grown to17% for the twelve month period reflective of positive operating leverage arising as a consequence of increases inrevenue not resulting in commensurate increases in operating expense.

During the quarter, Axia sold its interest in OpenNet in Singapore for $31.0 million (SGD$37.8 million). Axia hadinvested $24.5 million (SGD$29.7 million) in OpenNet to date. Axias carrying value of the investment includes thecash invested and Axias share of profits OpenNethas earned to date of $10.9 million, resulting in a total carryingvalue of $35.4 million. As a consequence of the agreement to sell, Axia wrote down the carrying value of theinvestment to the negotiated sale price, resulting in an impairment of $4.4 million. Included in the twelve monthperiod is Axias share of profits of $0.7 million, less the impairment resulting in a loss of $3.7 million.

Net income before tax totalled $1.4 million for the six months ended December 31, 2012 compared to $8.3 millionfor the twelve months ended December 31, 2013. Net income before tax as a percentage of revenue has grown to16% for the twelve month period compared to 6% for the six month period.

Net income attributable to common shareholders for the twelve month period ended December 31, 2013 was $1.9million or $0.03 per fully diluted share for the quarter. Net income attributable to common shareholders for the sixmonth period ended December 31, 2012 was $0.8 million, $0.01 per fully diluted share.

LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS

As at December 31, 2013, Axia had $38.8 million in cash compared to $2.3 million at December 31, 2012. Duringthe year, Axia generated $53.3 million of cash from operating activities in North America and the sale of its interestin Xarxa Oberta and OpenNet and received $2.8 million in cash from Covage, the first annual payment of interest.We invested in our business including: capital expenditures in North America of $8.1 million, net of electronicsfinanced through a capital lease; and investments in Covage in France of $6.9 million.

As at December 31, 2013 working capital was $29.2 million as compared to ($8.0) million at December 31, 2012.

Future contractual obligations for the consolidated groups commitments to third parties are as follows:

Operating leases include office premise leases in North America. A significant portion of the premiseleases have been sub-let on the same terms and conditions as the principal lease.

Loan payable relates to a capital lease in North America for network electronic equipment.

TwelveMonths

Ended

SixMonths

Ended

($000s) except per share amounts 2013 2012

IFRS Results

North America 15,667 8,529

Covage (4,141) (8,681)

OpenNet (1,836) 5,165

Xarxa Oberta 1,104 13

Corporate (8,924) (4,202)

Total 1,870 825

Net income per share 0.03$ 0.01$

Loan payable contractual

obligations

1-3 4-5 >5

($000s) Total < 1 year years years years

Operating leases 5,189$ 2,075$ 3,114$ -$ -$Purchase orders 376 376 - - -

Loan payable 2,287 990 1,297 - -

Other commitments 7,727 1,288 3,168 2,159 1,111

Total obligations 15,579$ 4,729$ 7,579$ 2,159$ 1,111$

Annual payments due by period

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Other committed capital includes obligations within North America related to business operations andcontractual commitments.

Based on our current cash forecast, we anticipate that the group can meet all of the remaining capitalcommitments as at December 31, 2013 through its existing cash resources, the continuing ability to generateincremental cash flow from operations and credit facilities.

We regularly review our level of capital resources and remaining planned investments and adjust our capital

spending plans accordingly. This review includes an analysis of discretionary capital requirements and potentialsources of additional capital. The evaluation takes into account factors such as the current economic environment,the state of equity markets, the ability to complete equity financings on favourable terms, the availability andprudence of debt and lease financing, and the availability of bonding and guarantee facilities.

During the course of business, we enter into a number of commitments related to our operations and thedevelopment of networks. In general, these commitments relate to our ability to provide services to certainstandards and maintain minimum service levels on these networks. Under the terms of our agreements for eachnetwork, we are committed to certain operating expenditures and also to providing certain standards of customerservice and performance. To provide these standards of service and performance, we are required to maintainand, where appropriate, replace certain assets owned by others.

As at December 31, 2013, the following bank guarantee is outstanding. The likelihood, amount and timing of a

draw on the bank guarantee are not determinable. We mitigate the likelihood of any potential drawdown through

our contract performance.

Purpose Amount Security

Bank Guarantee Issued pursuant to the terms of a significantoperating contract in North America and may bedrawn by the holder in the event of a major defaultin the contract

$1.5 million Restricted Long-term investments

NEW CREDIT FACILITY

On March 7, 2014, Axia successfully closed a secured credit facility with the Bank of Montral ( BMO) due June 30,2018 (Credit Facility). The Credit Facility consists of a revolving facility of $2.0 million for operating and generalworking capital purposes and a non-revolving term facility of up to $20.0 million to finance the communityinterconnect Fibre Grid in Alberta. For the non-revolving term facility principal is amortized until June 30, 2018 andrepaid quarterly commencing after the first year. In the first year, interest only is payable monthly and thereafter,quarterly.

Interest rate and expenses

Borrowings on the revolving facility bear interest at prime lending rates plus 0.25%. Borrowings on the non-revolving term facility bear interest at a current indicative fixed rate of less than 4.0% per annum based on theBMOscost of funds rate plus 1.50%. The actual fixed rate will be determined on the date the funds are advancedto Axia. As an alternative to a fixed rate the company may elect a variable rate based on prime lending rates plus0.25% or Bankers Acceptance rates plus 1.50%. The Credit Facility has a standby fee of 0.35%.

Security

The obligations and indebtedness under the Credit Facility are secured by general security agreement over Axiaand its subsidiaries and are subject to positive and negative covenants customary to credit facilities similar to theCredit Facility.

Financial covenants

In addition, Axia is subject to f inancial covenants including:

(i) the fixed charge coverage ratio shall not be less than 1.20:1.00; and(ii) the total net funded debt to North American EBITDA ratio shall not exceed 2.50:1.00.

Repayment

All obligations of Axia may, at the option of BMO, be forthwith due and payable upon an event of default under theCredit Facility. An event may include a breach of financial covenants not secured pursuant to the Credit Facility; abreach, non-performance or non-observance by Axia of any covenant, term or condition of the Credit Facility; achange of control; and such other events customary to similar credit facilities.

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FINANCIAL INSTRUMENTS

Axias financial instruments consist of cashand short term investments, restricted long-term investments, accountsreceivable, accounts payable, and loan payable. The accounts receivable and accounts payable balances ariseduring the ordinary course of business in the provision of Axias services. Loan payable relates to easecommitments with a financial institution to fund network electronics in North America. These leases mature onFebruary 22, 2016 to December 16, 2016 and are secured by the leased assets

Axia does not reasonably foresee any material impairment issues with the values of its financial instruments atDecember 31, 2013. The majority of our receivables are with large government or corporate customers andhistorically we have had very few collection issues and do not reasonably foresee any material collection issuesgoing forward.

NORMAL COURSE ISSUER BID

Axia renewed its NCIB for a further one-year period on December 13, 2013. Under the NCIB, Axia is authorized topurchase up to 3,106,383 common shares. During 2013, Axia purchased and cancelled 300,000 common shares atan average price of $1.96 per share pursuant to the NCIB.

DIVIDEND

Subsequent to quarter end, Axia announced the declaration of an initial quarterly cash dividend of $0.0125 pershare. The dividend reflects Axia's confidence in its ability to generate ongoing cash flow, its prospects for growth

and a desire to broaden its pool of potential shareholders.

SHARE CAPITAL

As at March 10, 2014, Axia had 63.0 million common shares outstanding. Pursuant to Axias Stock Option Plan(thePlan), 1.5 million common shares have been reserved for issuance pursuant to stock options granted underthe Plan. Through the Corporations long-term incentive plan, 0.3 million shares were purchased in the openmarket and are held in trust for certain officers and employees with a vesting period of three years. Further detailsand the accounting of these transactions are included in the Corporations audited consolidated financial statementsand related notes as at December 31, 2013. The table below depicts Axias Share Capital as at December 31,2013.

DISPUTE

On August 12, 2013, Axia initiated a formal arbitration proceeding against Bell claiming non-performance by Bellunder the SuperNet Master Agreement wherein Bell committed to use the SuperNet for its commercial traffic inrural Alberta. The arbitration proceeding is in the early stages of being constituted. The amount of the claim is tobe determined as it is dependent on the extent of Bells commercial traffic in rural Alberta. Axia is confident of itsposition, and believes the upside potential is material with no material downside.

SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements and related notes as at December 31, 2013 have been prepared bymanagement in accordance with IFRS.

NEW ACCOUNTING POLICIES

The accounting policies followed in these consolidated financial statements are consistent with those at December31, 2012, except as described below:

(i) IAS 1 Amendment, Presentation of items of Other Comprehensive IncomeThe Corporation has adopted the amendments to IAS 1 effective January 1, 2013. The amendmentrequires the Corporation to group other comprehensive income items by those that will be reclassified

Share Capital (000s) Q4 2013

Share Class

Common Shares issued and outstanding 61,925

Securities Convertible into Common Shares

Stock Options 2,317

Shares Held in Trust

Restricted Share Units 289

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subsequently to profit or loss and those that will not be reclassified. The Corporation has reclassifiedcomprehensive items of the comparative period. These changes did not result in any adjustments toother comprehensive income or comprehensive income.

(ii) IFRS 10, Consolidated Financial StatementsThe Corporation has adopted IFRS 10, Consolidated Financial Statements effective January 1, 2013.IFRS 10 builds on existing principles by identifying the concept of control as the determining factor

whether an entity should be included within the consolidated financial statements of the parent company.It provides additional guidance to assist in the determination of control where this is difficult to assess.These changes did not result in any material adjustments to the consolidated financial statements.

(iii) IFRS 11, Joint ArrangementsIFRS 11, Joint Arrangements, supersedes IAS 31, Interest in Joint Ventures, and requires jointarrangements to be classified either as a joint operation or joint venture depending on the contractualrights and obligations of each investor that jointly controls the arrangement. An investment in a jointventure is accounted for using the equity method as set out in IAS 28, Investment in Associates andJoint Ventures.

As a consequence of the adoption of IFRS 11, the Corporation has reclassified the operations in CovageSAS from a jointly controlled entity to a joint venture. The Corporations interest in Covage waspreviously accounted for using proportionate consolidation and upon adoption of IFRS 11 is accounted forretrospectively using the equity method of accounting. The adjustments for each financial statement line

item affected are presented in the tables in note 33 to the consolidated financial statements.

(iv) IFRS 12, Disclosure of Interest in Other EntitiesThe Corporation has adopted IFRS 12, Disclosure of Interests in Other Entities effective January 1, 2013.IFRS 12 requires disclosure on all forms of interests in other entities, including joint arrangements,associates, special purpose vehicles, and other off-balance-sheet vehicles. The adoption did not have amaterial impact on the financial statements and notes.

(v) IFRS 13, Fair Value MeasurementIFRS 13, Fair Value Measurement, provides a single framework for measuring fair value. Themeasurement of the fair value of an asset or liability is based on assumptions that market participantswould use when pricing the asset or liability under current market conditions, including assumptionsabout risk. The Corporation adopted IFRS 13 on January 1, 2013 on a prospective basis. The adoptionof IFRS 13 did not result in any adjustments.

USE OF ESTIMATES AND JUDGMENTS

The preparation of the consolidated financial statements in conformity with IFRS requires management tomake judgments, estimates and assumptions that are based on the circumstances and estimates at the dateof the financial statements and affect the application of accounting policies and the reported amounts ofassets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognized in the period in which the estimates are revised and in any future periods affected.

Information about assumptions and estimation uncertainties that have significant risk of resulting in amaterial adjustment within subsequent financial years are included in the following notes:

Judgments:

(i) Deferred taxesThe calculation of the deferred tax asset or liability is based on a number of assumptions includingestimating the future periods in which temporary differences, tax losses and other tax credits willreverse. Tax interpretations, regulations and legislation in the various jurisdictions in which theCorporation and its subsidiaries operate are subject to change.

(ii)Impairment indicatorsThe Corporation assess at the end of each reporting period whether there is an indication that an assetgroup may be impaired. If any indication of impairment exists, the Corporation determines the

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recoverable amount for the asset group. External indications for impairment include changes in customeror industry dynamics and other technologies and economic declines. Internal indications for impairmentinclude lower profitability than expected or planned restructuring.

(iii) Leases

The Corporation makes judgments in determining whether certain leases , in particular those with longcontractual terms where the lessee is the sole user and the Corporation is the lessor, are operating or

finance leases.

(iv) Revenue

The Corporation may enter into arrangements with customers which contain multiple elements in whichrevenue is recognized for each unit of accounting when earned based on the relative fair value of eachunit of accounting as determined by internal analysis of the contract. Significant judgment is required toallocate contract consideration to each unit of accounting and determine whether the arrangement is asingle unit of accounting or a multiple element arrangement. Depending upon how such judgment isexercise, the timing and amount of revenue recognized could differ significantly.

(v) Disposal of investment in associate or joint venture

The Corporation discontinues the use of the equity method for the date when the investment ceases to bean associate or a joint venture, or when the investment is classified as held for sale. The differencebetween the carrying amount of the associate or joint venture at the date the equity method was

discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interestin the associate or join venture is included in the determination of the gain or loss on disposal of theassociated or joint venture. In addition, the Corporation accounts for all amounts previously recognized inother comprehensive income in relation to that associate or joint venture on the same basis as would berequired if that associate or joint venture had directly disposed of the related asset orliabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by theassociate or joint venture would be reclassified to profit or loss on the disposal of the related asset orliabilities, the Corporation reclassifies the gain or loss from equity to profit or loss ( as a reclassificationadjustment) when the equity method is discontinued.

Estimates:

(i) Property and equipmentEstimated useful lives of property and equipment is based on management's assumptions about thephysical useful lives of the assets and the economic life, in addition to the estimated residual value and

method by which the assets depreciate (depreciation method).

If an indication of impairment exists, Axia estimates the recoverable amount of the asset group. Axiasimpairment tests compare the carrying amount of the asset or cash generating unit (CGU) to itsrecoverable amount. The recoverable amount is the higher of fair value less costs to sell and value inuse. The fair value less costs to sell is the amount obtainable from the sale of an asset or CGU in an armslength transaction between knowledgeable, willing parties, less the costs of disposal. The determination ofvalue in use requires the estimation and discounting of cash flows which involves key assumptions thatconsider all information available on the respective testing date. Management uses its judgment,considering past and actual performance as well as expected developments in the respective markets andin the overall macro-economic environment and economic trends to model and discount future cash flows.

(ii) Share-based paymentsCompensation costs pursuant to the share-based compensation plans are subject to estimated fair values,

forfeiture rates and the future attainment of performance criteria.

The fair value of the employee share options is measured using the Black-Scholes formula. Measurementinputs including share price on measurement date, exercise price of the instrument, expected volatility(based on weighted average historic volatility adjusted for changes expected due to publicly availableinformation), weighted average expected life of the instruments (based on historical and general optionholder behavior) and the risk-free interest rate (based on government bonds). Service and non-marketperformance conditions attached to the transaction are not taken into account in determining fair value.

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NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

The IASB has issued several new standards, amendments to standards, and interpretations that are not yeteffective for the year ended December 31, 2013, and although early adoption is permitted, they have not beenapplied in preparing our audited financial statements. Axia has made a preliminary assessment of the effect thatthese new standards will have on our financial results and determined that other than noted below no materialchange is expected.

IFRS 9, Financial Instruments: Recognition and Measurement.

IFRS 9 is a new standard on financial instruments that will replace IAS 39, Financial Instruments: Recognition andMeasurement. The first part of IFRS 9 was issued in November 2009 and addresses classification and measurementof financial assets. IFRS 9 has two measurement categories for financial assets: amortized cost and fair value. Allequity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding itto collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is at fair valuethrough profit or loss. IFRS 9 was originally published with an effective date for years beginning on or after January1, 2013. IFRS 9 was amended in December 2011 to defer the effective date, which has not been determined. Axiais currently evaluating the effect, if any, that this new standard will have on our financial results.

NON-GAAP ACCOUNTING MEASURES

Throughout this MD&A, we have used the term adjusted earnings before interest, taxes, depreciation andamortization (EBTIDA) which is not defined by GAAP but is used by management to evaluate the performance ofAxia and its business. As this is a Non-GAAP financial measure and may not have a standardized meaning,

securities regulations require that Non-GAAP financial measures are clearly defined, qualified and reconciled totheir nearest GAAP measure.

EBITDA is commonly used by management, investors and creditors in the calculation of ratios and financialperformance and is calculated as the sum of operating income plus depreciation and amortization. AdjustedEBITDA is calculated as the sum of operating income plus impairment losses and depreciation and amortization.

BUSINESS UNIT EBITDA

IFRS EBITDA

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Chief Executive Officer and the Chief Financial Officer are responsible for designing disclosure controlsand internal controls over financial reporting, as such terms are defined in National Instrument 52-109 Certificationof Disclosure in Issuers Annual and Interim Filings, or causing them to be designed under their supervision in orderto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with Canadian GAAP. We operate in an evolving environment with

respect to regulatory reporting requirements, changes to IFRS and financial reporting requirements. Our growinginternational initiatives also represent a specific area of additional accounting and financial reporting complexityand we continue to use the services of outside professionals for accounting, taxation and legal matters on aninternational basis.

We regularly review our controls and procedures by engaging independent consultants to review and test thecontrols and procedures, identify weaknesses and suggest improvements. As at December 31, 2013 the ChiefExecutive Officer and the Chief Financial Officer together with Axias management have evaluated the design andoperating effectiveness of Axias disclosure controls and procedures and internal controls over financial reporting,and have concluded that they are effective. It should be noted that a control system, no matter how wellconceived or operated, can provide reasonable, but not absolute assurance, that the objectives of the controlsystem are met.

($000s)

North America Covage North America Covage North America Covage North America Covage

Operating income 3,881 (1,062) 3,628 (1,531) 16,636 (3,572) 16,993 (7,494)

Depreciation and amortization 731 6,308 675 4,782 2,898 20,899 2,287 17,754

EBITDA1 4,612 5,246 4,303 3,251 19,534 17,327 19,280 10,2601as previously referred to on pages 7, 9 and 11

Twelve Months Ended

Q4 2013 Q4 2012 2013 2012

Three Months Ended

($000s) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Operating income 1,423 1,858 1,670 2,301 (5,589) 1,864 (88) 5,231

Depreciation and amortization 731 712 730 725 675 644 543 425

EBITDA1 2,154 2,570 2,400 3,026 (4,914) 2,508 455 5,6561as previously referred to on page 13

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During the quarter ended December 31, 2013, there were no changes in our internal controls over financialreporting that materially affected, or are reasonably likely to materially affect, the effectiveness of our internalcontrols over financial reporting.

TRENDS, EVENTS, RISKS AND UNCERTAINTIES

We operate in competitive and evolving markets locally, nationally and globally. These markets are subject torapid technological change and changes in customer preferences and demand. The ICT sector involves business

and regulatory risks that could significantly impact the operating results, financial condition and futuredevelopment plans of Axia. Markets for our products and services are often unproven and undeveloped, highlycompetitive, and subject to rapid technological change. Axia faces price competition, the challenge of developingnew markets and creating market awareness for many of these products and services.

We compete for a substantial portion of our business on a competitive bid basis. There is no certainty that we willbe successful in obtaining future contracts or that they will ultimately prove to be profitable. In addition, there isno certainty that the new products and services being developed will meet long-term customer acceptance.

A significant portion of our business activities in Alberta relate to the Alberta SuperNet, which is subject toagreements with the GoA and Bell. An increasing portion of our business activities is related to our operationsoutside of Alberta, pursuant to contracts of varying lengths for each network. Our current and future businessoperations would be adversely affected in the event of a dispute or a failure to perform under any of thesecontracts by any party or in the event these contracts are not renewed upon their expiry. The initial term of theAlberta SuperNet licence with the GoA expires in 2015 and has been renegotiated and extended until June 2018.

We have significant long term contracts in Alberta, Massachusetts, and France, the expiry dates of some of theseagreements are approaching. In Alberta, the extended term of our licence with the GoA expires in June 2018. InFrance, our standard agreements to operate and sell services on network segments have varying expiry dates from2019 to 2039. In both Alberta and France, we cannot be certain of the outcome of any competitive procurementprocess but we try to mitigate any potential loss of business by providing high quality and competitive services toour customers to favourably position ourselves in competitive procurement processes and create opportunities forsustainable business growth which do not rely upon the outcome of those processes.

A significant amount of Axias current business and a large number of Axias future business developmentopportunities are international. There are a number of risks inherent in international business activities, includinggovernment policies concerning the import and export of goods and services, costs of localizing products andsubcontractors in foreign countries, costs associated with the use of foreign agents, potentially adverse taxconsequences, significant changes in exchange rates, limits on repatriation of earnings, the burdens of complyingwith a wide variety of foreign laws, nationalization and possibly social, labour, political and economic instability.There can be no assurance that such risks will not adversely affect Axias b usiness, financial condition or results ofoperations.

Our success is largely dependent upon the quality of our management, sales, marketing and technical personneland other employees, as well as third party relationships.

We counter these risks by attracting, retaining and motivating personnel through creating a dynamic workingenvironment, emphasizing career and professional development and by rewarding employees with acomprehensive remuneration package that may include equity based compensation, benefits, performance-basedvariable compensation and the ability to purchase common shares through Axias Share Purchase Plan. However,there is no assurance that we will be able to retain existing personnel and third party relationships or attract newones as required.

ADVISORY ON FORWARD-LOOKING STATEMENTS

With the exception of historical information, the discussion of matters in this MD&A are forward-looking statementsthat involve assumptions, risks and uncertainties that could cause actual results to differ materially fromprojections or estimates contained herein. These forward-looking statements typically contain the words should,

believe, anticipate, may, plan, will, continue, intend, expect, estimate and other similarexpressions which constitute forward-looking information within the meaning of applicable Canadian securitieslegislation. These statements are based on our current expectations, estimates, forecasts and assumptions aboutthe operating environment, economies and markets in which we operate and are subject to important assumptions,risks and uncertainties that are difficult to predict. Such forward-looking statements include statements regardingestimated costs and timing of completion of NGNs, the timing and amount of future dividend payments, operatingcosts associated with our business and business development expenses associated with pursuing new businessopportunities, revenue and market penetration expectations and our ability to generate future cash flows.

Factors that could cause actual results to differ materially from these forward-looking statements include, amongothers:

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the costs and timing of network construction and activation activities, including forecasts of theseactivities;

the rate of adoption and market penetration of our networks including the forecasts we make as to thefuture market penetration to be achieved;

the profitability of operating and selling services on NGNs such as the forecasts we make with respect tothe future profitability of NGNs;

the performance by counterparties to our significant contracts and the retention of our principal customersunder these significant contracts;

changes in technology, customer markets and demand for our services; our ability to deliver services in a timely and cost efficient manner; retention of key personnel and third party relationships; economic and market conditions including but not limited to access to equity or debt capital on favourable

terms, if required;

future capital requirements of NGNs and the ongoing commitments resulting from their operations; changes in federal, provincial and foreign laws and regulations applicable to us; and risks associated with conducting business in foreign jurisdictions, including application of foreign laws to

contract and other disputes, uncertain political and economic environments and the impact of materialchanges in foreign exchange rates on our financial results.

The factors listed above are in addition to other factors which are described elsewhere in this MD&A and otherreports filed from time to time in our ongoing filings with the Canadian securities regulatory authorities, includingthose in our Annual Information Form, which can be found at www.sedar.com. Given these assumptions, risks anduncertainties, readers are cautioned not to place undue reliance on such forward-looking statements as futureevents and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Unless otherwise required by applicable securities laws, we undertake no obligation to publiclyupdate or revise any forward-looking statements either as a result of new information, future events or otherwise.All subsequent forward-looking statements, whether written or oral, attributable to Axia or persons acting on Axiasbehalf, are expressly qualified in their entirety by these cautionary statements.

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TERMS OF REFERENCE

AXIA TERMS

Next Generation Network (NGN)means the transport services of a network that is comprised of passive andactive layers (0-3) that also enables 3G/4G mobile networks. Axia refers to a Next Generation Network or NGN asa network that has implemented the Axia NGN Solution and over which Axia can provide NGN Transport Services,including Real Broadband services. The term next generation network is broadly used in the ICT sector to

describe certain emerging network architectures and technologies being deployed globally and typically means IP-based networks that encompass data and voice communications, as well as additional media such as video.

Axia NGN Solution means Axias approach to Next Generation Networks which is a complete solution thatstrategically combines modern technology and a business approach that creates the best result for end users.

NGN Transport Servicesmeans all transport services offered by Axia that may encompass Layer 0 to Layer 3and includes Real Broadband services.

Real Broadband means uncompromised transport services delivered by Axia on a Next GenerationNetwork. Real Broadband services give our customers the ability to quickly and reliably exchange large amountsof data, audio and video with guaranteed QoS. Axias Real Broadband enables symmetrical upload and downloadtransmission speeds for end users ranging from 5 Mbps to 10+ Gbps.

ICT SECTOR TERMS

The purpose of setting forth the terms defined below is to have a reference for common terms used in the ICTsector that are also used by Axia with a common understanding of the meanings. References used include theGartner Glossary of Information Technology Acronyms and Terms, the Glossary of Terms from the ITU-infoDev ICTRegulation Toolkit and Internet sources. In certain instances, the terms have been slightly modified to suit thecontext.

Backhaul refers to the portion of a network that comprises the intermediate links between the core of a network(where network to network interconnections are made), and edge of the network or last mile (where connections toa customer are made).

Bandwidth is the range of frequencies that can pass over a given transmission channel. The bandwidthdetermines the rate at which information can be transmitted through the circuit: the greater the bandwidth, themore information that can be sent in a given amount of time. Bandwidth is typically measured in bits per second.Increasing bandwidth potential has become a high priority for network planners due to the growth of multimedia,including videoconferencing, and the increased use of the Internet.

Broadbandmeans a transmission speed that is significantly higher than the transmission speed of conventionalcopper lines. There are no agreed standards as to minimum throughput or the quality of the service; therefore,unless the word broadband is accompanied by defined specifications, it is not a reliable term to use to describeperformance or capacity. Refer to Axias definition of Real Broadband.

Cloud Computing is a general term for anything that involves delivering hosted services over the Internet. ACloud service has three distinct characteristics that differentiate it from traditional hosting: (1) it is sold ondemand, typically by the minute or the hour; (2) it is elastic an end user can have as much or as little of aservice as they want at any given time; and (3) the service is fully managed by the provider (the consumer needsnothing but a personal computer and Internet access). Additionally, end users need not have knowledge of,expertise in, or control over the technology infrastructure in the cloud that supports them. Significant

innovations in virtualization and distributed computing, as well as improved access to high-speed Internet and aweak economy, have accelerated interest in Cloud Computing.

Dark fibrerefers to fibre-optic cable deployments that are not yet being used to carry network traffic. The worddark refers to the fact that no light is passing through the optical fibres.

Digital Subscriber Line (DSL) means an always-on access technology that uses public switched telephonenetwork infrastructure to offer high-speed access to the Internet. The technology exploits the unused capacity ofthe twisted-pair copper wire.

Fibre to the Home (FTTH)means fibre-optic access to an end users home for phone, Internet or media serviceswhere the home has a direct fibre connection.

Fibre to the Premise (FTTP)means fibre-optic access to any premise (residence, business, other) where thepremise has a direct fibre connection.

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Gateway means a mechanism for providing access to another network. An Internet Gateway can transfercommunications between an enterprise network and the Internet.

Information and Communication Technology (ICT)is a categorical term used to refer to the combined fieldsof computing and communications.

Lit fibrerefers to fibre-optic cable deployments where electronics have been installed on the fibre enabling it tocarry network traffic. The word lit refers to the fact that light is passing through the optical fibres to deliver

services.

Peering point means a place where many networks interconnect to exchange traffic on a peering basis. It allows anetwork to peer with many other networks but only incur the expense of a connection to a single point.

Points of presence are physical locations or interface points between communicating entities where services,connections, or colocation space are available for sale or rental.

Quality of Service (QoS) means a measure of network performance that reflects the quality and reliability of aconnection. QoS can indicate a data traffic policy that guarantees certain amounts of bandwidth at any given time,or can involve traffic shaping that assigns varying bandwidth to different applications.

Software as a Service (SaaS) is a model of software deployment whereby a provider licenses an application tocustomers for use as a service on demand. SaaS software vendors may host the application on their own webservers or download the application to the consumer device, disabling it after use or after the on-demand contractexpires. The on-demand function may be handled internally to share licences within a firm or by a third-party ASP

sharing licences between firms.

Web Service is both a software concept and infrastructure supported by several major computing vendors forprogram-to-program communication and application component delivery. The Web Services concept treatssoftware as a set of services accessible over ubiquitous networks using web-based standards and protocols. A WebService is a software component that can be accessed by another application (such as a client, a server or anotherWeb Service) through the use of generally available, ubiquitous protocols and transports.

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