Hawaiian Telcom Q3 next-gen revenue gains offset by 5.6% decline in voice access lines

Expanded consumer video and consumer, business HSI subscribers
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Hawaiian Telcom (Nasdaq: HCOM) reported on Thursday that Q3 2012 revenue was $96.6 million, down year-over-year from $97.0 million in Q3 2011.  

The telco's strong growth in IPTV, broadband Internet and equipment sales were offset by a 5.6 percent decline in traditional access lines.

At the same time, Hawaiian Telcom generated $5.6 million in net income, or $0.52 per diluted share for the quarter, down from $7.4 million or $0.68 per diluted share in the third quarter of 2011. It said the decline was due to a $1 million increase in depreciation and amortization due to investments made to upgrade its growing broadband network. 

"The success of Hawaiian Telcom TV continues to be a strong catalyst driving our second consecutive quarter of sequential growth in consumer revenues," said Eric K. Yeaman, Hawaiian Telcom's president and CEO, in the earnings release. "We expanded the number of video subscribers by 33 percent in the quarter, increasing the penetration of homes enabled to more than 14 percent, and further enhanced our product offering by introducing new premium content as well as innovative features like TV Everywhere."

Here's a breakdown of the Hawaiian Telcom's key metrics:

  • Business Services: Driven by a 6.3 percent increase in business high-speed Internet (HSI) subscribers as well as higher equipment sales, the telco's business revenues rose one percent year-over-year to $41.6 million. Yeaman said that switched Ethernet, IP-VPN and dedicated Internet access services "make up over 50 percent of business data revenues." Another contributor to the increase in business revenues was higher business HSI revenue as a result of a 6.3 percent year-over-year increase in business HSI subscribers to approximately 18,300. However, these gains were partially offset by expected declines in voice revenue related to the 2.1 percent and 1.8 percent year-over-year secular decline in business access and long distance lines, respectively. 

  • Consumer Services: In the consumer segment, revenues rose sequentially for the second consecutive quarter to $34.5 million, driven by a 48 percent increase in video service revenue. During the quarter, video service revenue grew to $1.5 million, up from $1 million in Q2 2012 driven by a 33 percent sequential increase in the number of subscribers in the quarter to approximately 8,400. Hawaiian Telcom also saw the growing effect of bundling broadband and TV services as HSI subscribers increased 3.8 percent year-over-year to 105,800 subscribers. Similar to the business segment, increases in next-gen consumer video and HSI services were offset by legacy consumer local voice and long distance lines of 8.5 percent and 7.5 percent, respectively.

  • Wholesale Services: The telco's Q3 wholesale revenue was $17.6 million, down 2.1 percent from Q3 2011.  Ongoing growth of Ethernet circuits provisioned over the new fiber builds and upgrades to certain existing Ethernet circuits, as well as a decline in the number of legacy circuit disconnects helped drive wholesale carrier data revenue up one percent year-over-year to $15.7 million. However, switched carrier access revenue declined 8.1 percent year-over-year to $2.2 million, a factor it attributes to the overall decline in access lines and minutes of use, as well as the impact of intercarrier compensation reform. A key point of the Wholesale Services unit is Fiber to the Tower (FTTT). Yeaman said the service provider has "220 sites completed, and we are starting to upgrade certain of the earlier sites to higher bandwidth circuits driven by the increased demand for network capacity from certain wireless carriers."

Hawaiian Telcom was listed at $16.75, up $0.25, or 1.48 percent, in morning trading on the NASDAQ stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the third quarter

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