Hawaiian Telcom earns $110M
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Hawaiian Telcom Communications Inc. got a boost in its fourth-quarter and annual earnings from the sale of its directory publishing business, which it finalized late last year.
The Honolulu-based telecommunications company today said it posted a profit of $117 million in 2007, up from a $145 million loss a year earlier.
Revenue fell 3.9 percent to $484 million from 2006 due to a 7 percent decline in switched-access lines.
Net income for the three months ending Dec. 31 was $110 million, compared to a $30 million loss a year earlier, on revenue of $116 million, down 6.6 percent from 2006.
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Hawaiian Telcom Communications Inc. yesterday said it swung to a profit last year and in the fourth quarter due to the sale of its directory publishing business, as it continued to clean up back-office operations in the face of slumping land-line subscribers.
The Honolulu-based telecommunications company, which in the past year trimmed its workforce and brought in a new management team, posted a profit of $117 million in 2007, up from a loss of $145 million a year earlier. Revenue fell 3.9 percent to $484 million from 2006 due to a 7 percent decline in switched access lines.
FOURTH-QUARTER GAIN:
$110 million
YEAR-EARLIER LOSS:
$30 million
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That drop was partially offset by an annual 14 percent jump in installation and maintenance revenues for customer home equipment, the company said in its annual report, released this morning. In the quarter, the company also finalized the $435 million sale of its directory publishing business to Colorado-based
Local Insight Media.
Net income for the three months ending Dec. 31 was $110 million, compared to a $30 million loss a year earlier, on revenue of $116 million, down 6.6 percent from 2006.
Hawaiian Telcom is in the midst of reorganization efforts that have included cutting more than 100 positions since early last year and the clearing of back-office operation problems the company blamed on former service provider BearingPoint Inc., which was replaced in May with Accenture Ltd.
Stephen Cooper, who took over as Hawaiian Telcom's new chief executive in early February, placed continued emphasis this morning on customer service.
"We have enlarged our core leadership group and we are about to move our marketing and sales efforts to a more customer-segment focused organization," he said on a conference call with investors and analysts. "We are also about to create a customer-care organization that will take our customers, so to speak, from the cradle to the grave by way of handling them in a very customer-friendly, customer-loving way."
Cooper said the company is in the process of simplifying products and service offerings on both residential and business sides, saying the replacement of Intel's AMT technology could help it gain market share lost to Oceanic Time Warner.
"We have been essentially in a state of internal repair for the last year or two," he said. "It's allowed them to gain even more ground on us."
Operating expenses in 2007 totaled $503 million, down from $558 million in 2006. Fourth-quarter operating expenses were up to $166 million in the quarter from $129 million a year earlier because of an increase in bad debt expense as well as high levels of overtime as a result of severe weather conditions in the quarter.
Local services revenue was $51.8 million, down 0.8 percent from the prior quarter, and down 5.3 percent from the previous year's fourth quarter, primarily due to a decline in switched-access lines of 2.2 percent quarter-over-quarter and 7 percent year-over-year.
The company posted an 11 percent decrease in residential land-line subscribers in the quarter from last year and 3 percent from the third quarter. As of Dec. 31, the company's telecommunications operations served 560,417 local access lines, with 59 percent serving residential customers.
"Residential line loss results were negatively impacted by a push in the fourth quarter to clean up certain systemic issues with processing nonpaid disconnects," interim Chief Financial Officer Robert Reich said on the call. "We pushed through several batches of nonpaid disconnects that had not been properly flowing through our system."
A decline in switched-access lines led to a fourth quarter 9.3 percent drop of network access services revenue to $33.7 million, from the year earlier. Revenue from long distance services was $8.8 million in the fourth quarter, a decline of 10.8 percent from the same period a year ago, caused by an overall decline in international usage as well as a reduction in average rate per minute with certain international rate plans.
The company added 4,200 myChoice bundle packages in the quarter, the same as third quarter, for a total of 24,242 customers. The plan packages home phone service, unlimited long-distance and high-speed Internet.
In the fourth quarter, high-speed Internet revenue was up 1.6 percent to $8.9 million versus the prior quarter, but decreased 3.5 percent from that of the previous year's fourth quarter, primarily due to certain promotional pricing programs.
For the full year, high speed Internet subscribers fell 35 million, a decrease of 9.6 percent from 2006. But in the fourth quarter the number of subscribers ticked up slightly to 93,450 from 92,800 in the third quarter.
"The DSL penetration appears to be well below where others are in the industry that many investors look at," David Sharret, an analyst with Lehman Brothers Inc. in New York, said on the call.
Hawaiian Telcom has high-speed Internet penetration of 17 percent of primary access lines, or 26 percent in just the residential market.
The company also prepaid $160 million of its Tranche C Term Loan in the year, followed by a first quarter 2008 prepayment of $211 million and $50 million of its Tranche C Term Loan and Revolving Loans, respectively.
After its spinoff from Verizon Communications more than two years ago, Hawaiian Telcom didn't record a quarterly profit until the first quarter of last year. Washington, D.C.-based private equity firm Carlyle Group acquired Verizon's Hawaii assets in 2005 for $1.6 billion, changing the company name to Hawaiian Telcom.