Hawaiian Telcom posts first profit since spinoff
First-quarter earnings reflect a $45.7M boost from a settlement
For the first time since its rebirth as an independent company two years ago, Hawaiian Telcom has recorded a quarterly profit.
The company got a big boost into the black from the multimillion-dollar February settlement over its troubled back- office systems, but Hawaiian Telcom CEO Michael Ruley said the transition to its new systems provider is going smoothly, allowing it to restore its focus on new products and services.
While the number of customers for land lines continued to decline, as expected, operating revenue was up, and the number of high-speed Internet subscribers increased over the year-ago quarter.
Hawaiian Telcom also saw the number of subscribers to its myChoice bundle plan, launched late last year, more than double.
"We are building a stronger foundation going forward," Ruley said.
Hawaiian Telcom is reporting a quarterly profit for the first time since its spinoff two years ago from Verizon Communications.
The company said yesterday it made $15.5 million in net income in the first quarter of this year. At the same time last year, it was $38.6 million in the red.
Hawaiian Telcom's move into the black came with a big push from its February settlement with BearingPoint Inc. over back-office systems blamed for massive customer-service problems starting in April 2006.
Hawaiian Telcom, which has since replaced BearingPoint with Accenture Ltd., said it booked a $45.7 million gain from the settlement as part of this year's first-quarter results.
But Hawaiian Telcom CEO Michael Ruley said the transition of systems management to Accenture is already allowing the company to restore its focus on new products and services.
First-quarter operating revenue was $143.1 million, 1.1 percent higher than the previous year's first quarter, driven mostly by increased demand for special access data services, according to the company.
"Together with other recent strategic initiatives we have taken, like the sale of our directory publishing business and the outsourcing of directory assistance, we are building a stronger foundation going forward," said Ruley. The directory sale, to Local Insight Media for $435 million, awaits approval by the Public Utilities Commission.
The company said yesterday it has 91,000 high-speed Internet subscribers, up from 83,575 in the year-earlier quarter, but still below its peak of 92,300 in last year's third quarter.
The company's myChoice bundle plan -- a package of home phone service, unlimited long distance and high-speed Internet service that Hawaiian Telcom launched in the fourth quarter of last year -- won 15,325 subscribers in the first quarter, up from 7,000 the prior quarter.
As expected, the number of land-line subscribers remains on a steady decline. Hawaiian Telcom spokeswoman Ann Nishida said the company had about 595,000 access line subscribers in the first quarter of this year. That compares to 602,900 in the fourth quarter of 2006 -- which was down 2 percent from the third quarter.
Excluding the gain on settlement, operating expenses went down $9.3 million in the first quarter to $142.2 million, compared to $151.6 million in the first quarter of 2006.
Hawaiian Telcom received a cash payment of $52 million as the result of the settlement with BearingPoint, but the company said its recorded gain for accounting purposes was $45.7 million.
Hawaiian Telcom was born in 2005, when the Carlyle Group of Washington, D.C., acquired Verizon's Hawaii assets for $1.6 billion, changing the company name from Verizon Hawaii to Hawaiian Telcom.