Integra Telecom Q3 earnings rise on strategic business sales

Kept churn and pricing stable while increasing focus on multisite businesses, wholesale
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Integra Telecom reported on Thursday that Q3 revenues were $149.0 million, up from $148.6 million in Q2 2012.

Integra On-Net buildings 2012

Integra's on-net buildings in Q3 (Image source: Integra Q3 presentation)

The service provider attributed the revenue growth to ongoing stability in its "existing customer base with respect to both churn and pricing, and the penetration of targeted customers with the company's strategic product set."

Likewise, Integra's adjusted EBITDA rose to $44.9 million from $43.0 million sequentially. Throughout 2012, the service provider has increased its annualized adjusted EBITDA by more than $10 million.

While the company is not abandoning its traditional small to medium business (SMB) customer base, a big driver behind the Q3 growth is CEO Kevin O'Hara's push to leverage its growing regional metro fiber footprint to target both businesses and new wholesale carrier opportunities.

"When you look at the survey of our assets, we had some amazing assets that allowed us to differentiate ourselves so we began a process a couple of years ago to try to get the company moving up market with a combination of enterprise and wholesale in a more concerted effort," O'Hara said in a previous interview with FierceTelecom. "The pace wasn't particularly aggressive so that's what we changed last year, and the conclusion we reached was that the verticals within the market segments within our particular footprint were screaming out for someone like Integra to put more time and energy into them."  

In targeting new larger multisite business customers, the CLEC has been focusing on developing a new set of products and capabilities, particularly centered on three key areas: hosted voice services; expanding its Ethernet over Copper footprint, which allowed it to extend Ethernet services to over 400,000 businesses; and increasing on-net presence to almost 2,200 buildings.  

These new product sets are paying off for the service provider.

During the third quarter, Integra said 79 percent of new sales, up from 57 percent last year, came from these new strategic products. What's more, 70 percent of the new sales were to multi-location customers, including Oregon Health Network and the State of Washington.

Integra has been just as aggressive on the wholesale side. Leveraging the assets it purchased from Electric Lightwave (ELI) in 2005, which had been mainly used for interoffice transport for its SMB customer base, has become a platform for the wavelength service set it launched in April.

To create more unity around its wholesale business, the CLEC recently renamed the unit Integra Wholesale and named former Comcast Business and Level 3 executive Martha Tate as the unit's new Vice President.

Looking towards Q4, Integra has forecast that line-based revenue and adjusted EBITDA growth will continue.

For more:
- here's the Q3 report (.pdf)
- and the earnings presentation (.pdf)

Special report: Wireline telecom earnings in the third quarter

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