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SureWest's broadband gains help offset Q2 landline voice losses

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SureWest (Nasdaq: SURW) saw the fruits of its broadband-focused labor pay off in Q2 2011 as consolidated revenues rose 1 percent year-over-year to $61 million.

Driven by growth in its Kansas City, Mo. market, SureWest's broadband revenues grew by $2.9 million, or 7 percent, more than offsetting expected telecom revenue declines of $2.5 million, or 14 percent.

The ILEC's Q2 net income was $1.3 million versus a net loss of $527 thousand in Q2 2010.

In addition to seeing broadband growth, SureWest's June 2010 cost cutting measures started to see signs of progress in the second quarter as it reduced its operating expenses by 7 percent, or $2.9 million, year-over-year to $40.3 million.

Here's a breakdown of SureWest's key metrics:

  • Landline losses: As expected, SureWest's traditional voice telecom revenues declined 14 percent year-over-year due to the industrywide declines in PSTN voice services. The service provider lost 3,900 voice Revenue Generating Units (RGU) compared to a loss of 5,700 in Q2 2010. However, the migration of traditional access lines to VoIP service enables the continued preservation of consolidated voice revenues.
  • Broadband: Broadband was the star of SureWest's portfolio, growing 7 percent year-over-year and accounting for 75 percent of the company's total revenues in the quarter, compared to 71 percent in the second quarter 2010. Residential broadband revenues rose 4 percent year-over-year to $32.1 million due to 3 percent growth in RGUs and a 2 percent increase in overall ARPU, primarily driven by new IPTV customers throughout its Sacramento ILEC and broadband CLEC territories.
  • Video services: SureWest's total net video RGUs were up 6 percent year-over-year and 2 percent sequentially. As of the end of the quarter, SureWest served 17,800 Advanced Digital TV subscribers, representing 66 percent of the company's video RGUs in Sacramento. Consumer video ARPU was $133 with about 98 percent of these customers bundling video service with broadband data.
  • Business: Due to ongoing economic challenges in California, SureWest's Q2 business revenue declined 1 percent year-over-year to $8.3 million. However, the service provider believes it will see growth through new business opportunities as the economy recovers in the next year.

Looking beyond Q2 2011, SureWest has maintained its guidance to continue expanding its network with 15,500 new homes connected to its FTTH network in Kansas City and plans to upgrade 6,800 of its homes with copper connections in the Sacramento region in order to support video services.

For more:
- see the earnings release
- Sacramento Business Journal has this article

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