Axia NetMedia Corporation Managements Discussion & Analysis For 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 information relating 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 ............................................................................................ 2 AXIA OVERVIEW ............................................................................................................................................. 3 KEY METRICS ................................................................................................................................................. 5 STRATEGY AND OUTLOOK ................................................................................................................................ 6 BUSINESS UNIT RESULTS AND ANALYSIS .......................................................................................................... 7 FINANCIAL DISCUSSION AND ANALYSIS.......................................................................................................... 13 SIGNIFICANT ACCOUNTING POLICIES ............................................................................................................. 17 NON-GAAP ACCOUNTING MEASURES ............................................................................................................... 20 DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING .............................................. 20 TRENDS, EVENTS, RISKS AND UNCERTAINTIES ................................................................................................ 21

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 prior year. Net income, excluding the adjustments related to the sale of investments, the non-cash expenses in Corporate 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 the operational management of the business including strategy setting, approval of operating and financial plans, key personnel appointments, compensation decisions and ongoing monitoring of performance. As a result 100% of the financial and operational results of Axia North America and Covage are included in the business unit review. Further details 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 the change, the financial information below has been adjusted to reflect the unaudited twelve month period for 2012. The change 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 Business Unit Results ($000s) NGN Services revenue 98,541 Total revenue 109,995 Expenses 80,465 EBITDA 1 29,530 Depreciation and amortization 23,797 BU Operating income 5,733 IFRS ($000s) Net income 1,870 Earnings per share $ 0.03 Total cash 38,758 Total assets 135,044 Total loans payable 2,287 1 Refer to "Non-GAAP measures" on page 20

2012 83,908 94,110 72,081 22,029 20,041 1,988 6,872 0.11 2,112 126,166 1,625

2011 80,063 95,965 76,299 19,666 18,667 999 4,941 0.08 11,065 113,552 -

2010 67,562 86,786 73,422 13,364 16,413 (3,049) 5,993 0.09 12,135 105,785 -

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 not exist. Our success has been driven by our ability to deliver networks that provide our customers with increased choice, and provide communities with a reliable infrastructure and resultant economic benefit. Axia is focused on providing 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 our growing footprint and increasing usage of our networks. Our goal is to be a dominant provider of digital transport services 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 digital transport 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 fosters competition by separating the network from the services provided over that network, thereby increasing the customers choice of services and providers. Unlike the traditional telco model, Axias approach creates a value chain of industry players that each excel at delivering their core competency. The result is a transformation to markedly improved performance and service, lower cost and increased choice of services and providers for end users. Leverage government grants and committed spend: in delivering its infrastructure and services within a sustainable 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 through connecting 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 our addressable market in ways that make commercial sense. We also manage investment in and disposition of networks to ensure our unique value proposition is recognized and the ongoing growth opportunity is attractive on a risk-adjusted basis.

Jurisdiction: Name: Primary Services: Network Status: Axia Ownership: Network Activation: Fibre length: Headcount: Customer Connections Infrastructure Replacement Cost Axias Investment Operating Structure

North America: Alberta, Canada Axia Bandwidth Operational 100% 2005 13,000 kms 126 4,761 $380.0 million $40.0 million Combination of owned fibre networks and operating agreements with the Government of Alberta. The end of the current term on the operating agreement is June 30, 2018 Consolidation

North America: Western Massachusetts, USA Axia USA Bandwidth Dark fibre Construction 100% 2014 2,150 kms 5 16 Under construction $0.4 million Operating agreement with the state is a renewable ten year licence initial term ends in 2023

France Covage Bandwidth Dark fibre Operational 50% 2010 8,530 kms 131 4,379 $290.0 million $90.0 million Combination of owned fibre networks and concession agreements with regional communities with terms of varying lengths (from 15 years to 25 years) with terms ending from 2019 to 2037 Equity accounting

Financial Reporting:

Consolidation

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. For the fourth quarter, NGN Services revenue totalled $27.3 million up 22% over the same period last year.

NGN Services revenue $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $Q1 Q2 Q3 Q4 2012 2013
$83,908

$22,921

$23,488

$24,810

$27,322

$98,541

$100,000 $95,000 $90,000 $85,000 $80,000 $75,000 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.

EBITDA $10,000 $8,000 $6,000 $4,000 $2,000 $Q1 Q2 Q3 Q4 2012 2013

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

$6,881

$7,530

$7,029

$8,090
$22,029

$40,000
$29,530

$30,000 $20,000 $10,000 $0 2012 2013

STRATEGY AND OUTLOOK

Axia's goal is to gain market share in regions we currently operate in. To achieve this goal, Axia invests in network infrastructure and operating teams in order to build and expand its footprint and connect customers. Axia sees attractive 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 community interconnect fibre grid so that it can offer services to the private sector in all Alberta communities. This project is scheduled for completion over the next 12-18 months and will be funded by the $20.0 million capital expenditure facility. In addition, Axia has set aside approximately $10.0 million of its cash on hand to be deployed over the next 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 adoption would achieve acceptable financial returns. In France, Covage has emerged as the leading independent, pure-play fibre operator in the French market and Axia plans to capitalize on this position. In addition to continued growth within its existing network footprint, Covage is active on several bids for new networks. Given the success Covage has had to date growing its business and the favourable operating and regulatory environment in France, Axia has set aside $20.0 to $30.0 million of its cash on hand over the next four years to help fund potential wins and acquisitions that adhere to its strict financial return criteria. 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 a desire to broaden its pool of potential shareholders.

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 to Covages growing customer connections. Covages revenue grew 47% over the same quarter last year to $18.4 million. North America grew revenue 9% over the same quarter last year to $13.1 million driven by demand for increased bandwidth.
($000s) North America C ovage TOTAL Three Months Ended Q4 2013 Q4 2012 13,110 12,044 18,394 12,507 31,504 24,551 Change Twelve Months Ended $ % 2013 2012 1,066 9 50,036 47,661 5,887 47 59,959 46,448 6,953 28 109,995 94,110 Change $ % 2,375 5 13,511 29 15,885 17

Revenue for 2013 totalled $110.0 million, up 17% over last year reflecting growth in both business units. Covage increased revenue by $13.5 million or 29% over last year due to network expansion and increased market penetration. North America increased revenue by 5% or $2.4 million over last year due to increased customer demand 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 increase of $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 new business in Massachusetts of $1.0 million for Q4 2013, up $0.1 million from the same period last year. Expenses are 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 increased DSL revenue in a regional network in Covage and incremental costs associated with deploying our new community networks.
($000s) North America C ovage C orporate TOTAL Three Months Ended Q4 2013 Q4 2012 8,498 7,741 13,148 9,256 1,768 1,679 23,414 18,676 Change $ 757 3,892 89 4,738 % Twelve Months Ended 2013 2012 10 30,502 28,381 42 42,632 36,188 5 7,331 7,512 25 80,465 72,081 Change $ % 2,121 7 6,444 18 (181) (2) 8,384 12

Expenses for the twelve month period totalled $80.5 million, up 12% over 2012 primarily due to network expansion 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 EBITDA margin in North America remains consistently high at 33%. Covage has improved operating leverage and the EBITDA margin increased from 26% to 29% over the same quarter last year.
Three Months Ended ($000s) Q4 2013 Q4 2012 North America 4,612 4,303 C ovage 5,246 3,251 C orporate (1,768) (1,679) TOTAL 8,090 5,875 EBITDA is a Non-GAAP measure and is calculated Twelve Months Ended 2013 2012 309 7 19,534 19,280 1,995 61 17,327 10,260 (89) (5) (7,331) (7,512) 2,215 38 29,530 22,029 on page 20, Non-GAAP Measures. $ % Change Change $ 254 7,067 181 7,501 % 1 69 2 34

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 rate at 69% while North America remains relatively consistent.

QUARTERLY BUSINESS UNIT RESULTS

2013 Q4 Q3 Q2 Q1 Q4 22,408 24,551 5,875 5,457 418 Q3 20,959 23,941 6,167 4,927 1,240 Business Unit Results ($000s) NGN Services revenue 27,322 24,810 23,488 22,921 Total revenue 31,504 26,521 26,721 25,249 EBITDA 1 8,090 7,029 7,530 6,881 Depreciation and amortization 7,039 5,867 5,447 5,444 BU Operating income 1,051 1,162 2,083 1,437 IFRS ($000s) Net income (2,024) (2,262) (361) 6,517 Earnings per share $ (0.03) $ (0.03) $ (0.01) $ 0.10 Total cash 38,758 6,618 1,781 4,802 Total assets 135,044 128,635 133,036 135,610 Total loans payable 2,287 2,446 2,019 2,198 1 Refer to "Non-GAAP measures" on page 20 2012 Q2 19,912 22,769 5,178 4,816 362 611 6,768 118,366 Q1 20,629 22,849 4,809 4,841 (32) 5,437 0.09 5,809 117,527 -

(2,382) 3,207 (0.03) $ 0.05 2,112 1,234 126,166 124,040 1,625 1,671

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

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

2013 Business Unit Results ($000s) NGN Services revenue 46,077 Total revenue 50,036 EBITDA 1 19,534 Depreciation and amortization 2,898 Operating income 16,636 IFRS ($000s) Net income 15,667 Total assets 33,220 1 Refer to "Non-GAAP measures" on page 20

2012 43,755 47,661 19,280 2,287 16,993 17,255 27,197

2011 43,227 52,088 20,607 1,545 19,062 18,699 18,288

2010 44,466 55,093 24,928 1,887 23,041 22,177 14,423

In the last year, North American operations grew revenue and began positioning itself for a period of growth, slightly impacting operating income.
Three Months Ended Q4 2013 Q4 2012 Business Unit Results ($000s) NGN Services revenue Total revenue EBITDA 1 Depreciation and amortization Operating income KPIs Retail service providers Active customer connections C apital expenditures ($000s) IFRS ($000s) Net income Total assets 1 Refer to "Non-GAAP measures" on 11,966 13,110 4,612 731 3,881 95 4,804 3,895 1,730 33,220 page 20 11,316 12,044 4,303 675 3,628 87 4,619 1,897 3,795 27,197 Change $ 650 1,066 309 56 253 8 185 1,998 (2,065) 6,023 % 6 9 7 8 7 9 4 105 (54) 22 Twelve Months Ended 2013 2012 46,077 50,036 19,534 2,898 16,636 43,755 47,661 19,280 2,287 16,993 Change $ 2,322 2,375 254 611 (357) % 5 5 1 27 (2)

8,973 15,667

15,694 17,255

(6,721) (1,588)

(43) (9)

Axia North America revenue growth is achieved by proactively connecting new customers and developing and selling services which meet customer needs for greater bandwidth usage. NGN Services revenue grew 6% over the same quarter last year to $12.0 million for the quarter. Total revenue is up $1.1 million or 9% over the same quarter 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. For 2013, the Bell Facilities Fee totalled $1.9 million compared to $0.8 million for the prior year. This fee is expected to grow in relation to increasing revenue. Commencing on July 1, 2015, the Bell Facility Fee will be replaced by a local access services agreement at a cost of $6.0 million per year for current services and is adjustable for an increase in services purchased. EBITDA was $4.6 million for the quarter, up 7% over the prior period as expense growth was marginally lower than revenue 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 and network 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 FTTP connections to the province-wide network. Axia brings innovation and competition to the market. The Corporation recently 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. Axia is planning strategic fibre investments to support the ongoing delivery of high quality fibre services to its existing customers and position the business for long term growth. Community Interconnect Fibre Grid: Axia has begun a project to deploy fibre and related electronics so that it can offer services to customers in all Alberta communities and operate what it believes to be the most comprehensive, high quality and resilient fibre network interconnecting communities in the province. This province-

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wide network will allow Axia to offer its services to private sector customers in communities where Axia has been providing services solely to Government of Alberta (GoA) customers. This project is scheduled for completion over the next 12-18 months. Subsequent to year end, Axia established a credit facility of $20.0 million to fund this fibre build. Fibre-to-the-Premise: Axia has set aside $10.0 million cash to be deployed over the next two years to fund, in select locations, the local fibre connections of a FTTP initiative. This project would deliver FTTP to underserved markets 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 and business 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 and attractively 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 km fibre backbone. Covage sells lit and dark fibre services to enterprise, government, small and medium-sized businesses and residential end users. 2013 2012 2011 2010 Business Unit Results ($000s) NGN Services revenue 52,464 40,153 36,836 23,096 Total revenue 59,959 46,448 43,877 31,693 EBITDA 1 17,327 10,260 7,765 271 Depreciation and amortization 20,899 17,754 16,846 14,180 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 C ovage 60,535 52,067 51,946 65,849
1

Refer to "No n-GA A P measures" o n page 20

The B usiness Unit Results in the table abo ve and discussio n belo w include 1 00% o f Co vage s o peratio ns. The IFRS results include A xia's 50% o wnership under equity acco unting.

Over the last four years, Covage has increased revenue from $31.7 million to $60.0, a cumulative annual growth rate of 53%. EBITDA grew from $0.3 million to $17.3 million, an average of $5.6 million per year. Covage continues to leverage its operations increasing their EBITDA/Revenue ratio from 1% to 33%.
Three Months Ended Q4 2013 Q4 2012 Business Unit Results ($000s) NGN Services revenue Total revenue EBITDA 1 Depreciation and amortization Operating Income KPIs Retail service providers Active customer connections C apital expenditures ($000s) IFRS ($000s) Axia's share of net income (loss) Axia's book value of investment in C ovage
1

Change $ 4,264 5,887 1,995 1,526 469 34 631 3,149 6,848 % 38 47 61 32 31 29 16 60 91

Twelve Months Ended 2013 2012 52,464 59,959 17,327 20,899 (3,572) 40,153 46,448 10,260 17,754 (7,494)

Change $ 12,311 13,511 7,067 3,145 3,922 % 31 29 69 18 52

15,356 18,394 5,246 6,308 (1,062) 150 4,524 8,412 (690)

11,092 12,507 3,251 4,782 (1,531) 116 3,893 5,263 (7,538)

28,350 (2,053)

14,961 (8,063)

13,389 6,010

89 75

60,535 52,067 8,468 16 Refer to "Non-GAAP measures" on page 20 The Business Unit Results in the table above and discussion below include 100% of C ovages operations. The IFRS results include Axia's 50% ownership under equity accounting.

NGN Services revenue for the quarter increased $4.3 million or 38% over the same quarter last year to $15.4 million. This is reflective of the continuing growth in customer connections and services. Total revenue for the quarter increased $5.9 million or 47% over the same quarter last year to $18.4 million. In 2013, NGN Services revenue grew $12.3 million or 31% to $52.5 million. Total revenue for the twelve month period grew 29% to $60.0 million. 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, EBITDA is up 69% to $17.3 million compared to 2012. EBITDA has increased significantly as the network infrastructure is leveraged 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 the prior year. Capital expenditures for the period totalled $8.4 million up 60% over the same period last year. Two-thirds of the quarterly 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 growth as it increases penetration of the French market. Annual interest payments on loans advanced by its shareholders are being covered by Covage's cash flow. The first interest payment of $2.8 million was received in December 2013.

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Covage has emerged as the leading independent, pure-play fibre operator in the French market and is now focusing on the following growth strategies. Growth within Existing Network Footprint: Over the next three to five years, Axia expects Covage to increase its market penetration to 15 to 20%, from 10.3% currently. Axia expects a high proportion of incremental revenue to flow through to EBITDA as its cost base should not increase significantly unless the business expands by winning new 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 being driven mostly by the Federal Governments initiative to broadly deploy FTTH beyond the high density areas where incumbents have committed to deploy FTTH. Given the success Covage has had to date growing its business and the favourable operating and regulatory environment in France, Axia has set aside $20.0 - $30.0 million of its cash on 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 financial return criteria. While there is no certainty with respect to the timing and magnitude of such wins, Covages current bid pipeline could represent an increase in the addressable market of approximately 40,000 enterprises and 900,000 homes. If Covage is successful in winning these bids, it would be incremental to the existing business and could 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 market penetration to reasonable levels.

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FINANCIAL DISCUSSION AND ANALYSIS

ANNUAL RESULTS

($000s except per share amounts) 2013 IFRS Results Total revenue 50,036 Operating income 7,252 Net income attributable to common shareholders 1,870 Net income per share $ 0.03 1 Refer to "Non-GAAP measures" on page 20
QUARTERLY RESULTS
2013 ($000s except per share amounts) IFRS Results NGN Services revenue Total revenue Operating expenses Selling, general and administration Axia's share of loss (income) in C ovage EBITDA 1 Depreciation and amortization Operating income Q4 11,966 13,110 6,658 3,608 690 2,154 731 1,423 Q3 11,779 12,319 6,212 3,136 401 2,570 712 1,858 (3,706) 1,059 (640) (2,262) $ (0.03) Q2 11,286 12,465 7,219 2,384 462 2,400 730 1,670 (1,291) 371 (361) $ (0.01)

2012 47,661 1,418 6,872 0.11

2011 52,308 7,914 4,941 0.08

2010 55,093 9,325 5,993 0.09

2012 Q1 11,046 12,142 6,339 2,277 500 3,026 725 2,301 3,160 1,660 7,079 6,517 $ 0.10 Q4 11,316 12,044 6,818 2,602 7,538 (4,914) 675 (5,589) 2,969 (2,631) (2,382) $ (0.03) Q3 10,655 12,393 6,022 3,066 797 2,508 644 1,864 2,196 4,030 3,207 $ 0.05 Q2 10,789 11,532 6,486 2,477 2,114 455 543 (88) 1,907 1,699 611 $ Q1 10,995 11,692 5,963 2,459 (2,386) 5,656 425 5,231 951 6,187 5,437 $ 0.09

Axia's share of (loss) income in OpenNet Gain on disposal of Xarxa Oberta 239 Gain on disposal of property Net income before income taxes 1,500 Net income (2,024) Net income per share $ (0.03) 1 Refer to "Non-GAAP measures" on page 20

REVENUE Axia generates revenue from two sources: NGN Services and Connection Services. NGN Services are networkbased services that are recurring and include fibre access fees, bandwidth services, value-added services and other complementary related services. Connection Services are services that connect new customers to our networks and include project work related to network design, construction, and network change, and other connection services activities. Due to the nature of these services, revenue from Connection Services tends to fluctuate quarter by quarter.
($000s) IFRS Results NGN Services C onnection Services Total revenue Three Months Ended Q4 2013 Q4 2012 11,966 1,144 13,110 11,316 728 12,044 Change $ 650 416 1,066 % 6 57 9 Twelve Months Ended 2013 2012 46,077 3,959 50,036 43,755 3,906 47,661 Change $ 2,322 53 2,375 % 5 1 5

NGN Services revenue for Q4 2013 increased 6% or $0.7 million over the same quarter last year from $11.3 million to $12.0 million. Connection Services revenue increased $0.4 million to $1.1 million compared to the same quarter last year. Connection Services revenue can be expected to fluctuate period over period depending on the level 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 revenue grew $2.4 million or 5% to $50.0 million. EXPENSES
($000s) Operating Selling, general and administration Total Three Months Ended Q4 2013 Q4 2012 6,658 6,818 3,608 2,602 10,266 9,420 Change Twelve Months Ended $ % 2013 2012 (160) (2) 26,428 25,289 1,006 39 11,405 10,604 846 9 37,833 35,893 Change $ % 1,139 5 801 8 1,940 5

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

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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 same quarter last year. For the twelve month period, SG&A expenses have increased $0.8 million or 8% to $11.4 million. This increase relates to: 1) increased personnel costs in North America related to the restructuring of the business unit into customer units; and 2) fees related to the sale of investments and non-cash expenses in Corporate 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 million for the same quarter last year. Operational results have been steadily improving in Covage as they gain market share and execute on their strategy. Axias accounting for the Covage business unit changed from proportionate consolidation to equity accounting due to the adoption IFRS 11, Joint arrangements on January 1, 2013. The financial results of Covage are now reported on the income statement and balance sheet as an equity accounted joint venture. See the Corporations consolidated 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 the twelve month period, operating income increased $5.8 million to $7.3 million. The increase in both periods primarily 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 last year. 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 are currently incurring non-capital start-up losses. The benefit of these non-capital losses is recognized as a deferred tax 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 losses expected to be utilized over a forecasted five year period. This change in estimate resulted in a decrease in income of $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. The decrease in North America is primarily due to a change in estimate related to future tax benefits in our US operations. France continues to grow steadily. During the twelve month period, Axias investment in OpenNet was sold resulting in an impairment of $4.4 million. Net income for 2013 was $1.9 million or $0.03 per share as compared to $6.9 million or $0.11 per fully diluted share for 2012. This decrease is primarily due to the accounting impairment of the sale of OpenNet in 2013 compared to profits earned in 2012 of $8.0 million partially offset by improving profits earned on France by Covage.
($000s) except per share amounts IFRS Results North America C ovage OpenNet Xarxa Oberta C orporate Total Net income per share Three Months Ended Q4 2013 Q4 2012 1,730 (2,228) (1,527) (2,024) $ (0.03) 3,795 (7,706) 2,969 145 (1,585) (2,382) $ (0.03) Change $ (2,065) 5,478 (2,969) (145) 58 358 $ % Twelve Months Ended 2013 2012 15,667 (4,141) (1,836) 1,104 (8,924) 1,870 0.03 17,253 (8,413) 8,023 (602) (9,389) 6,872 $ 0.11 Change $ (1,586) 4,272 (9,859) 1,706 465 (5,002) $ (0.08) % (9) (51) (123) (283) (5) (73) (73)

(54) (71) (100) (100) (4) 15 $

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, comparative period is a six month fiscal year from July 1, 2012 to December 31, 2012. Below is an analysis comparing the reported fiscal years. NGN Services revenue for the six months ended December 31, 2012 was $24.4 million compared to $50.9 million for the twelve months ended December 31, 2013. Average quarterly NGN Services revenue for the six month

15

period was $12.2 million compared to a quarterly average of $12.7 million for the twelve months ended December 31, 2013. Total expenses for the six months ended December 31, 2012 were $19.8 million compared to $41.6 million for the twelve months ended December 31, 2013. Average quarterly operating expense for both the six month period and the twelve month period was consistent, at approximately $10.0 million per quarter reflecting the leveling off of expenses 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 $3.7 million for the six months ended December 31, 2012. Operating income as a percentage of revenue has grown to 17% for the twelve month period reflective of positive operating leverage arising as a consequence of increases in revenue 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 had invested $24.5 million (SGD$29.7 million) in OpenNet to date. Axias carrying value of the investment includes the cash invested and Axias share of profits OpenNet has earned to date of $10.9 million, resulting in a total carrying value of $35.4 million. As a consequence of the agreement to sell, Axia wrote down the carrying value of the investment to the negotiated sale price, resulting in an impairment of $4.4 million. Included in the twelve month period 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 million for the twelve months ended December 31, 2013. Net income before tax as a percentage of revenue has grown to 16% for the twelve month period compared to 6% for the six month period.
Twelve Months Ended 2013 Six Months Ended 2012

($000s) except per share amounts IFRS Results North America C ovage OpenNet Xarxa Oberta C orporate Total Net income per share

15,667 8,529 (4,141) (8,681) (1,836) 5,165 1,104 13 (8,924) (4,202) 1,870 825 $ 0.03 $ 0.01

Net income attributable to common shareholders for the twelve month period ended December 31, 2013 was $1.9 million or $0.03 per fully diluted share for the quarter. Net income attributable to common shareholders for the six month 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. During the year, Axia generated $53.3 million of cash from operating activities in North America and the sale of its interest in 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 electronics financed 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:
Loan payable contractual obligations ($000s) Operating leases Purchase orders Loan payable Other commitments Total obligations

Annual payments due by period 1-3 4-5 Total < 1 year years years $ 5,189 $ 2,075 $ 3,114 $ - $ 376 376 2,287 990 1,297 7,727 1,288 3,168 2,159 $ 15,579 $ 4,729 $ 7,579 $ 2,159 $

>5 years 1,111 1,111

Operating leases include office premise leases in North America. A significant portion of the premise leases 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.

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

Based on our current cash forecast, we anticipate that the group can meet all of the remaining capital commitments as at December 31, 2013 through its existing cash resources, the continuing ability to generate incremental 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 potential sources 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 and prudence 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 the development of networks. In general, these commitments relate to our ability to provide services to certain standards and maintain minimum service levels on these networks. Under the terms of our agreements for each network, we are committed to certain operating expenditures and also to providing certain standards of customer service and performance. To provide these standards of service and performance, we are required to maintain and, 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 Bank Guarantee Issued pursuant to the terms of a significant operating contract in North America and may be drawn by the holder in the event of a major default in the contract Amount $1.5 million Security Restricted Longterm 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 general working capital purposes and a non-revolving term facility of up to $20.0 million to finance the community interconnect Fibre Grid in Alberta. For the non-revolving term facility principal is amortized until June 30, 2018 and repaid 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 nonrevolving term facility bear interest at a current indicative fixed rate of less than 4.0% per annum based on the BMOs cost of funds rate plus 1.50%. The actual fixed rate will be determined on the date the funds are advanced to Axia. As an alternative to a fixed rate the company may elect a variable rate based on prime lending rates plus 0.25% 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 Axia and its subsidiaries and are subject to positive and negative covenants customary to credit facilities similar to the Credit Facility. Financial covenants In addition, Axia is subject to financial covenants including: (i) (ii) Repayment All obligations of Axia may, at the option of BMO, be forthwith due and payable upon an event of default under the Credit Facility. An event may include a breach of financial covenants not secured pursuant to the Credit Facility; a breach, non-performance or non-observance by Axia of any covenant, term or condition of the Credit Facility; a change of control; and such other events customary to similar credit facilities. the fixed charge coverage ratio shall not be less than 1.20:1.00; and the total net funded debt to North American EBITDA ratio shall not exceed 2.50:1.00.

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FINANCIAL INSTRUMENTS Axias financial instruments consist of cash and short term investments, restricted long-term investments, accounts receivable, accounts payable, and loan payable. The accounts receivable and accounts payable balances arise during the ordinary course of business in the provision of Axias services. Loan payable relates to ease commitments with a financial institution to fund network electronics in North America. These leases mature on February 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 at December 31, 2013. The majority of our receivables are with large government or corporate customers and historically we have had very few collection issues and do not reasonably foresee any material collection issues going 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 to purchase up to 3,106,383 common shares. During 2013, Axia purchased and cancelled 300,000 common shares at an 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 per share. 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 (the Plan), 1.5 million common shares have been reserved for issuance pursuant to stock options granted under the Plan. Through the Corporations long-term incentive plan, 0.3 million shares were purchased in the open market and are held in trust for certain officers and employees with a vesting period of three years. Further details and the accounting of these transactions are included in the Corporations audited consolidated financial statements and related notes as at December 31, 2013. The table below depicts Axias Share Capital as at December 31, 2013.
Share Capital (000s) Share Class C ommon Shares issued and outstanding Securities Convertible into Common Shares Stock Options Shares Held in Trust Restricted Share Units

Q4 2013 61,925 2,317 289

DISPUTE On August 12, 2013, Axia initiated a formal arbitration proceeding against Bell claiming non-performance by Bell under the SuperNet Master Agreement wherein Bell committed to use the SuperNet for its commercial traffic in rural Alberta. The arbitration proceeding is in the early stages of being constituted. The amount of the claim is to be determined as it is dependent on the extent of Bells commercial traffic in rural Alberta. Axia is confident of its position, 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 by management in accordance with IFRS. NEW ACCOUNTING POLICIES The accounting policies followed in these consolidated financial statements are consistent with those at December 31, 2012, except as described below: (i) IAS 1 Amendment, Presentation of items of Other Comprehensive Income The Corporation has adopted the amendments to IAS 1 effective January 1, 2013. The amendment requires the Corporation to group other comprehensive income items by those that will be reclassified

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subsequently to profit or loss and those that will not be reclassified. The Corporation has reclassified comprehensive items of the comparative period. These changes did not result in any adjustments to other comprehensive income or comprehensive income. (ii) IFRS 10, Consolidated Financial Statements The 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 Arrangements IFRS 11, Joint Arrangements, supersedes IAS 31, Interest in Joint Ventures, and requires joint arrangements to be classified either as a joint operation or joint venture depending on the contractual rights and obligations of each investor that jointly controls the arrangement. An investment in a joint venture is accounted for using the equity method as set out in IAS 28, Investment in Associates and Joint Ventures. As a consequence of the adoption of IFRS 11, the Corporation has reclassified the operations in Covage SAS from a jointly controlled entity to a joint venture. The Corporations interest in Covage was previously accounted for using proportionate consolidation and upon adoption of IFRS 11 is accounted for retrospectively 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 Entities The 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 a material impact on the financial statements and notes. (v) IFRS 13, Fair Value Measurement IFRS 13, Fair Value Measurement, provides a single framework for measuring fair value. The measurement of the fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The Corporation adopted IFRS 13 on January 1, 2013 on a prospective basis. The adoption of 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 to make judgments, estimates and assumptions that are based on the circumstances and estimates at the date of the financial statements and affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are 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 a material adjustment within subsequent financial years are included in the following notes: Judgments: (i) Deferred taxes The calculation of the deferred tax asset or liability is based on a number of assumptions including estimating the future periods in which temporary differences, tax losses and other tax credits will reverse. Tax interpretations, regulations and legislation in the various jurisdictions in which the Corporation and its subsidiaries operate are subject to change. (ii) Impairment indicators The Corporation assess at the end of each reporting period whether there is an indication that an asset group 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 customer or industry dynamics and other technologies and economic declines. Internal indications for impairment include lower profitability than expected or planned restructuring. (iii) Leases The Corporation makes judgments in determining whether certain leases , in particular those with long contractual 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 which revenue is recognized for each unit of accounting when earned based on the relative fair value of each unit of accounting as determined by internal analysis of the contract. Significant judgment is required to allocate contract consideration to each unit of accounting and determine whether the arrangement is a single unit of accounting or a multiple element arrangement. Depending upon how such judgment is exercise, 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 be an associate or a joint venture, or when the investment is classified as held for sale. The difference between 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 interest in the associate or join venture is included in the determination of the gain or loss on disposal of the associated or joint venture. In addition, the Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related asset or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by the associate or joint venture would be reclassified to profit or loss on the disposal of the related asset or liabilities, the Corporation reclassifies the gain or loss from equity to profit or loss ( as a reclassification adjustment) when the equity method is discontinued. Estimates: (i) Property and equipment Estimated useful lives of property and equipment is based on management's assumptions about the physical 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. Axias impairment tests compare the carrying amount of the asset or cash generating unit (CGU) to its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of an asset or CGU in an arms length transaction between knowledgeable, willing parties, less the costs of disposal. The determination of value in use requires the estimation and discounting of cash flows which involves key assumptions that consider 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 and in the overall macro-economic environment and economic trends to model and discount future cash flows. (ii) Share-based payments Compensation 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. Measurement inputs 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 available information), weighted average expected life of the instruments (based on historical and general option holder behavior) and the risk-free interest rate (based on government bonds). Service and non-market performance 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 yet effective for the year ended December 31, 2013, and although early adoption is permitted, they have not been applied in preparing our audited financial statements. Axia has made a preliminary assessment of the effect that these new standards will have on our financial results and determined that other than noted below no material change 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 and Measurement. The first part of IFRS 9 was issued in November 2009 and addresses classification and measurement of financial assets. IFRS 9 has two measurement categories for financial assets: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is at fair value through profit or loss. IFRS 9 was originally published with an effective date for years beginning on or after January 1, 2013. IFRS 9 was amended in December 2011 to defer the effective date, which has not been determined. Axia is 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 and amortization (EBTIDA) which is not defined by GAAP but is used by management to evaluate the performance of Axia 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 to their nearest GAAP measure. EBITDA is commonly used by management, investors and creditors in the calculation of ratios and financial performance and is calculated as the sum of operating income plus depreciation and amortization. Adjusted EBITDA is calculated as the sum of operating income plus impairment losses and depreciation and amortization. BUSINESS UNIT EBITDA
Three Months Ended ($000s) Twelve Months Ended Q4 2013 Q4 2012 2013 2012 North America C ovage North America C ovage North America C ovage North America C ovage 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 1 EBITDA 4,612 5,246 4,303 3,251 19,534 17,327 19,280 10,260 1 as previously referred to on pages 7, 9 and 11

IFRS EBITDA
($000s) Operating income Depreciation and amortization EBITDA 1
1

Q4 1,423 731 2,154

Q3 1,858 712 2,570

Q2 1,670 730 2,400

Q1 2,301 725 3,026

Q4 (5,589) 675 (4,914)

Q3 1,864 644 2,508

Q2 (88) 543 455

Q1 5,231 425 5,656

as previously referred to on page 13

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Chief Executive Officer and the Chief Financial Officer are responsible for designing disclosure controls and internal controls over financial reporting, as such terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements 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 growing international initiatives also represent a specific area of additional accounting and financial reporting complexity and we continue to use the services of outside professionals for accounting, taxation and legal matters on an international basis. We regularly review our controls and procedures by engaging independent consultants to review and test the controls and procedures, identify weaknesses and suggest improvements. As at December 31, 2013 the Chief Executive Officer and the Chief Financial Officer together with Axias management have e valuated the design and operating 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 well conceived or operated, can provide reasonable, but not absolute assurance, that the objectives of the control system are met.

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

TRENDS, EVENTS, RISKS AND UNCERTAINTIES

We operate in competitive and evolving markets locally, nationally and globally. These markets are subject to rapid 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 future development plans of Axia. Markets for our products and services are often unproven and undeveloped, highly competitive, and subject to rapid technological change. Axia faces price competition, the challenge of developing new 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 will be successful in obtaining future contracts or that they will ultimately prove to be profitable. In addition, there is no 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 to agreements with the GoA and Bell. An increasing portion of our business activities is related to our operations outside of Alberta, pursuant to contracts of varying lengths for each network. Our current and future business operations would be adversely affected in the event of a dispute or a failure to perform under any of these contracts by any party or in the event these contracts are not renewed upon their expiry. The initial term of the Alberta 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 these agreements are approaching. In Alberta, the extended term of our licence with the GoA expires in June 2018. In France, our standard agreements to operate and sell services on network segments have varying expiry dates from 2019 to 2039. In both Alberta and France, we cannot be certain of the outcome of any competitive procurement process but we try to mitigate any potential loss of business by providing high quality and competitive services to our customers to favourably position ourselves in competitive procurement processes and create opportunities for sustainable 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 development opportunities are international. There are a number of risks inherent in international business activities, including government policies concerning the import and export of goods and services, costs of localizing products and subcontractors in foreign countries, costs associated with the use of foreign agents, potentially adverse tax consequences, significant changes in exchange rates, limits on repatriation of earnings, the burdens of complying with 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 of operations. Our success is largely dependent upon the quality of our management, sales, marketing and technical personnel and other employees, as well as third party relationships. We counter these risks by attracting, retaining and motivating personnel through creating a dynamic working environment, emphasizing career and professional development and by rewarding employees with a comprehensive remuneration package that may include equity based compensation, benefits, performance-based variable 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 new ones as required.

ADVISORY ON FORWARD-LOOKING STATEMENTS

With the exception of historical information, the discussion of matters in this MD&A are forward-looking statements that involve assumptions, risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. These forward-looking statements typically contain the words should, believe, anticipate, may, plan, will, continue, intend, expect, estimate and other similar expressions which constitute forward-looking information within the meaning of applicable Canadian securities legislation. These statements are based on our current expectations, estimates, forecasts and assumptions about the 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 regarding estimated costs and timing of completion of NGNs, the timing and amount of future dividend payments, operating costs associated with our business and business development expenses associated with pursuing new business opportunities, 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, among others:

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the costs and timing of network construction and activation activities, including forecasts of these activities; the rate of adoption and market penetration of our networks including the forecasts we make as to the future market penetration to be achieved; the profitability of operating and selling services on NGNs such as the forecasts we make with respect to the future profitability of NGNs; the performance by counterparties to our significant contracts and the retention of our principal customers under 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 material changes 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 other reports filed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in our Annual Information Form, which can be found at www.sedar.com. Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements as future events and actual results could differ materially from those set forth in, contemplated by or underlying the forwardlooking statements. Unless otherwise required by applicable securities laws, we undertake no obligation to publicly update 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 Axias behalf, 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 and active layers (0-3) that also enables 3G/4G mobile networks. Axia refers to a Next Generation Network or NGN as a 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 IPbased 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 that strategically combines modern technology and a business approach that creates the best result for end users. NGN Transport Services means all transport services offered by Axia that may encompass Layer 0 to Layer 3 and includes Real Broadband services. Real Broadband means uncompromised transport services delivered by Axia on a Next Generation Network. Real Broadband services give our customers the ability to quickly and reliably exchange large amounts of data, audio and video with guaranteed QoS. Axias Real Broadband enables symmetrical upload and download transmission 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 sector that are also used by Axia with a common understanding of the meanings. References used include Gartner Glossary of Information Technology Acronyms and Terms, the Glossary of Terms from the ITU-infoDev Regulation Toolkit and Internet sources. In certain instances, the terms have been slightly modified to suit context. ICT the ICT the

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 to a customer are made). Bandwidth is the range of frequencies that can pass over a given transmission channel. The bandwidth determines the rate at which information can be transmitted through the circuit: the greater the bandwidth, the more 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. Broadband means a transmission speed that is significantly higher than the transmission speed of conventional copper 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 describe performance 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. A Cloud service has three distinct characteristics that differentiate it from traditional hosting: (1) it is sold on demand, typically by the minute or the hour; (2) it is elastic an end user can have as much or as little of a service as they want at any given time; and (3) the service is fully managed by the provider (the consumer needs nothing 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 a weak economy, have accelerated interest in Cloud Computing. Dark fibre refers to fibre-optic cable deployments that are not yet being used to carry network traffic. The word dark 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 telephone network infrastructure to offer high-speed access to the Internet. The technology exploits the unused capacity of the twisted-pair copper wire. Fibre to the Home (FTTH) means fibre-optic access to an end users home for phone, Internet or media services where the home has a direct fibre connection. Fibre to the Premise (FTTP) means fibre-optic access to any premise (residence, business, other) where the premise has a direct fibre connection.

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

An Internet Gateway can transfer

Information and Communication Technology (ICT) is a categorical term used to refer to the combined fields of computing and communications. Lit fibre refers to fibre-optic cable deployments where electronics have been installed on the fibre enabling it to carry 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 a network 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 a connection. 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 to customers for use as a service on demand. SaaS software vendors may host the application on their own web servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires. 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 for program-to-program communication and application component delivery. The Web Services concept treats software as a set of services accessible over ubiquitous networks using web-based standards and protocols. A Web Service is a software component that can be accessed by another application (such as a client, a server or another Web Service) through the use of generally available, ubiquitous protocols and transports.