Hawaiian Telcom reports losses of $30M
Hawaiian Telcom posts second straight loss
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Hawaiian Telcom Communications Inc. might be facing the biggest challenge of its 125-year history: how to lure and keep customers in the face of increasing competition and effectively introduce new products such as video.
The Honolulu-based telecommunications company said yesterday that continued land-line subscriber losses hurt second-quarter earnings. It lost $30.5 million for the three months ending June 30, down from a profit of $21.4 million a year earlier.
Revenue was $115.3 million, down 5 percent from $121.4 million a year ago.
Hawaiian Telcom has lost more than $201 million since Carlyle Group of Washington, D.C., acquired Verizon Communication Inc.'s Hawaii assets for $1.6 billion in 2005.
While subscribers declined last quarter for switched access and long-distance lines from the year-earlier period, high-speed Internet subscriptions rose by 2 percent. During a conference call last quarter, former Chief Executive Stephen Cooper said the company had begun an effort to switch existing high-speed Internet customers to a faster network.
Eric Yeaman stepped in as the head of Hawaiian Telcom in May and hired six senior executives in the quarter.
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Hawaiian Telcom Communications Inc. again reported a quarterly loss yesterday as declining land-line usage continued to hurt results.
The company, which will be 125 years old this month, hired a new chief executive officer and six senior managers in the second quarter to help reverse slumping Internet profits and expand into a new frontier: video services. From October through the first quarter of 2008, the company reduced its management team by about 100 positions.
The company lost $30.5 million in the three months that ended June 30, in contrast with a profit of $21.4 million a year earlier. Revenue fell 5 percent to $115.3 million from $121.4 million a year before.
It is the company's second straight quarterly loss after posting a profit in the fourth quarter of 2007 on the sale of its directory publishing business. Hawaiian Telcom has had three profitable quarters since Carlyle Group of Washington, D.C., acquired Verizon Communication Inc.'s Hawaii assets for $1.6 billion in 2005.
Altogether, Hawaiian Telcom has lost more than $201 million since Carlyle took over.
Last quarter, discounted high-speed Internet services offset an increase in customers from the year-earlier period. High-speed Internet revenue for the quarter slumped less than a percentage point to $8.8 million.
The company increased high-speed Internet subscriptions by 2 percent to 93,463 from 91,643 last year, with a 3 percent boost in residential customers to 76,243 from 73,891, while the business segment slumped 2 percent to 15,767 from 16,162 a year ago. Internet subscriptions fell by less than 1 percent from 94,230 at the end of last quarter.
Switched access lines continued their decline to 533,360 in the quarter, an 8 percent decrease from 580,921 last year. Residential customers slumped 11 percent to 307,394 from 345,556, while business customers sank 4 percent to 220,578 from 229,716.
Chief Financial Officer Robert Reich said the company was "seeing some mild softening in the business climate here in Hawaii" in the most recent quarter. Land-line subscriptions dropped by 2 percent from 545,448 last quarter.
Long-distance lines fell 5 percent to 256,111 from 270,188 a year earlier. Of those, residential lines slumped 7 percent to 172,323 from 184,758, and business lines dropped 2 percent to 83,788 from 85,430. Long-distance lines fell by 2 percent from 260,198 last quarter.
The company added 5,600 myChoice bundles in the second quarter, down 5 percent from 5,900 added a year earlier, and off 14 percent from 6,500 added last quarter. The myChoice bundle includes home phone service, unlimited long distance and high-speed Internet.
Local services revenue sank 7 percent to $49.1 million from $52.6 million a year earlier; network access services fell less than 1 percent to $34.7 million; and long-distance services dropped 5 percent to $9.5 million from $10 million -- all because of a shrinking land-line subscriber base.
Former Hawaiian Electric Co. executive Eric Yeaman, who stepped in as chief executive of Hawaiian Telcom in May to replace turnaround specialist Stephen Cooper, brought in three managers in May, and three were announced last month.
The company said in its regulatory filing that it is "pursuing other initiatives designed to improve the company's operating results," but did not provide details.
Yeaman was not available for comment before the company's quarterly conference call this morning.
Operating expenses edged down 2 percent to $123.2 million from $125.6 million a year earlier. Excluding nonrecurring costs and depreciation and amortization, operating expenses totaled $79.6 million, flat from a year ago and the previous quarter.
At the end of second quarter, the company had $71.8 million in cash and cash equivalents, compared with $93 million at the end of the first quarter and $4.7 million a year ago. Capital expenditures for the second quarter were $17 million and total $39.8 million year to date.