Hawaiian Telcom slips back into red
The company gained high-speed Internet subscribers, but at reduced rates
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Hawaiian Telcom Communications Inc.
said yesterday that lower rates ate into profits from high-speed Internet customers last quarter, while the national trend away from land-line usage continued to drag on its results.
The troubled telecommunications company, which has cut more than 100 positions since early last year and announced two changes in leadership since February, posted a loss of $40.1 million, down from net income of $15.5 million a year earlier.
Revenue for the three months ending March 31 was $112.4 million, down 10.4 percent from $125.5 million a year earlier.
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Hawaiian Telcom Communications Inc. said today a continued slump in land-line subscribers and high-speed Internet prices again pushed quarterly results into the red.
First-quarter loss
$40.1 million
Year-ago gain
$15.5 million
|
The Honolulu-based tele-communications company posted a loss of $40.1 million, down from net income of $15.5 million a year earlier, when earnings got a boost from a multimillion-dollar settlement with
BearingPoint Inc. over back-office systems troubles that started in April 2006.
That was the first quarterly profit for the company since Carlyle Group of Washington, D.C., acquired Verizon's Hawaii assets for $1.6 billion in 2005. It has since posted profit in the second and fourth quarters of 2007 on the termination of a $1 billion credit line and the sale of its directory publishing business, respectively.
The company has weathered two changes of leadership since February, as well as reorganization efforts that have included the elimination of 100 positions since early last year. Last week, Eric Yeaman, senior executive vice president and chief operating officer of Hawaiian Electric Co., was selected to replace Stephen Cooper, who has been serving as interim CEO since Feb. 4 when he replaced Michael Ruley.
Revenue for the three months ending March 31 was $112.4 million, down 10.4 percent from $125.5 million a year earlier.
Operating expenses jumped 48.2 percent to $126.6 million from $85.4 million due to the comparable quarter's $45.7 million settlement boost.
Excluding non-recurring costs and depreciation and amortization, operating expenses declined 8.3 percent to $79.6 million from the fourth quarter on lower bad debt expense, and were flat from the previous year.
The number of high-speed Internet subscribers rose to 94,230 in the quarter from 93,450 in the prior quarter and 91,000 a year earlier. Revenue in that segment -- also known as digital subscriber line, or DSL -- was $8.8 million, flat versus the prior quarter, and a decrease of 2.5 percent from a year earlier.
The company has begun an effort to switch existing high-speed Internet customers to a faster network, Cooper said yesterday on a conference call with investors and analysts.
"Market research that we've conducted has identified speed as the top reason our HSI users switch to other broadband providers, so we expect to see HSI churn improvement from these efforts," he said.
The company added 6,500 myChoice bundles in the first quarter, up 54.8 percent from 4,200 added last quarter, but a smaller increase than the 15,325 subscribers added a year ago. The plan packages home phone service, unlimited long-distance and high-speed Internet.
Local services revenue was $49.6 million, down 4.2 percent from $51.8 million in the prior quarter, and 8.1 percent from a year earlier, on a respective 2.7 percent and 8.3 percent quarter-over-quarter and year-over-year decline in switched access lines.
The company ended the quarter with 545,448 total switched access lines, down 2.7 percent from 560,417 last quarter and 8.3 percent from 594,564 a year ago.
Business access lines totaled 222,065 this quarter, down 3.9 percent from 231,079 last year.
"We are seeing some mild softening in the business climate here in Hawaii," Robert Reich, who was recently appointed CFO after serving in an interim capacity since March 7, said on the conference call.
First-quarter network access services revenue was $33.1 million, down 1.9 percent from the prior quarter and 18.7 percent from 2007. Long distance services revenue was $9 million, flat versus the prior quarter, and an increase of 8.3 percent from a year ago.
In March, Hawaiian Telcom borrowed the remaining available principal amount under its revolving credit facility, increasing the total amount drawn under that facility to $89.8 million.
Earlier this month, the state Division of Consumer Advocacy did not support a request by Hawaiian Telcom to increase its revolving credit facility. The state Public Utilities Commission has yet to make a ruling.
"Given the current financial markets and given what we continue to see as the dislocation in these markets we believe that securing these rights to increase the revolver is an asset that the company should preserve," Cooper said on the conference call.
As of March 31, the company had $93 million in cash and cash equivalents compared to $8.8 million at the end of the fourth quarter and $4.9 million a year ago. Capital expenditures for the first quarter were $22.8 million.
