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Hawaiian Telcom's consumer revenue rises 4% to $36.4M on strong video, broadband adds

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Hawaiian Telcom's (Nasdaq: HCOM) fourth-quarter 2013 consumer revenue climbed 4 percent to $36.4 million as the company reported ongoing gains in both broadband and its emerging IPTV product.

Like its larger telco brothers AT&T (NYSE: T) and Verizon (NYSE: VZ), Hawaiian Telcom's TV subscriber base rose 87 percent in 2013 and experienced a 91 percent attachment of high speed Internet (HSI) services.

Eric Yeaman, CEO of Hawaiian Telcom, said in the earnings release that TV drove "2.5 percent growth in consumer revenues."

The service provider also saw similar gains in the business segment. Driven by its acquisitions of SystemMetrics and Wavecom, business revenues were $44.7 million, up 10.6 percent from the same period a year ago.

Here's a breakdown of the telco's key metrics:

Consumer revenue: Similar to earlier quarters, the consumer story is dominated by video and high speed Internet.

Video service revenue was $4.2 million, up from $1.8 million in the fourth quarter of 2012, driven by the addition of about 8,600 subscribers in 2013. It ended the year with nearly 18,400 TV subscribers in service. During the quarter, the telco enabled 9,000 additional homes, increasing the total number of homes enabled to 120,000 at year-end. At the same time, subscriber penetration increased to approximately 15 percent, from approximately 14 percent at the end of the third quarter of 2013.

Consumer HSI revenue benefited from a 3.9 percent year-over-year increase in consumer HSI subscribers to approximately 91,400, which was primarily driven by high HSI pull-through rates for new video subscribers and standalone HSI additions. As of the end of 2013, Hawaiian Telcom said that about 55 percent of total video subscribers purchased a triple-play and about 91 percent had double- or triple-play bundles. The rise in next-gen consumer video and HSI services was partially offset by the decline in legacy consumer access and long distance lines of 8.3 percent and 7.3 percent, respectively.

"We expanded the reach of Hawaiian Telcom TV to fifty percent of the marketable households on Oahu, which positions us to capture a greater share of the consumer video and broadband market in Hawaii," Yeaman said. "We grew our Hawaiian Telcom TV subscriber base by 87 percent in 2013 and experienced a 91 percent attachment of broadband with these customers, driving 2.5 percent growth in consumer revenues."

Business revenue: Excluding revenue related to Wavecom, business data revenue was up 10.3 percent year-over-year driven by higher demand for IP-based data services. Broadband service was also a factor. The service provider reported that business HSI subscribers rose 4 percent year-over-year to about 19,300. However, these increases were partially offset by a $0.5 million decrease in equipment and managed services revenue and the year-over-year decline in legacy business access and long distance revenues.

Wholesale revenue: In the wholesale channel, a key area of growth is fiber to the tower (FTTT) services. The service provider has built fiber out to 289 cell sites and has struck contracts with large wireless operators to build an additional 141 sites.

Yeaman said that the "FTTT projects provide attractive investment returns and by strategically routing the fiber to these sites, we also extend our broadband capabilities to additional potential retail customers."

While Hawaiian Telcom is making strides in the wireless backhaul market, ongoing declines continue to make a dent in its overall wholesale revenue mix, which declined $1.8 million year-over-year to $16 million. Likewise, wholesale carrier data revenue declined $1.5 million year-over-year to $14.4 million, due to what Hawaiian Telcom said was the elimination of previously recognized revenue that related to services provided to Wavecom.

From an overall financial perspective, the fourth quarter and full year 2013 revenues were $101 million and $391.2 million, up 4.1 percent and 1.5 percent year-over-year, respectively. The service provider's fourth-quarter and full year 2013 adjusted EBITDA was $30.7 million and $119.9 million, down $2.5 million and $2.1 million year-over-year. It reported a one-time net settlement gain of approximately $2.5 million associated with its Wavecom acquisition.

Shares of Hawaiian Telcom were listed at $28.43, down 59 cents or 2.1 percent, in Thursday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Earnings summary: Wireline telecom earnings in the fourth quarter of 2013

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