Consolidated's business, broadband services help it beat Q4 estimates, offset voice, video declines

Consolidated Communications is maintaining its focus on broadband and business services as well as its expansion of metro Ethernet services and new fiber to the tower (FTTT) sites. But revenue increases from these initiatives during the company's fourth quarter may have been dragged down somewhat by continuing declines in voice services and network access revenues as well as subsidies.

Still, Consolidated topped analyst estimates for the quarter, reporting adjusted diluted net income of $4.7 million or 16 cents per share for the fourth quarter of 2015, unchanged from the previous year. Analysts had forecast just 14 cents per share.

The provider saw a 3.8 percent increase in commercial and carrier revenue in the fourth quarter of 2015, while its metro Ethernet circuits increased 21 percent and cloud hosted voice lines grew 17 percent over the full year. Consolidated also added 345 new tower sites, a record for the year.

"The fourth quarter concluded another solid year for the company with strong growth in our commercial and carrier revenues led by metro Ethernet and new fiber to the tower sites," said Bob Udell, president and CEO. "The successful execution of our strategy is evident by the continued expansion of our fiber network, growth in our business and broadband services, and consistent cash flows supporting our dividend to shareholders."

Consolidated put its $33.8 million in quarterly capital expenditures to use, growing its on-net buildings by 3.7 percent in the quarter to end the year with 5,163 buildings. The provider's fiber route network miles, both long-haul and metro, rose 2.1 percent in the quarter. Consolidated ended 2015 with 13,717 fiber route network miles, a 10.6 percent leap for the full year.

Udell said on the company's earnings call that Consolidated is putting about two-thirds of its capex toward "success-based initiatives." While the provider still is spending more on its consumer side than some of its partners may want it to, Udell said, "our growth on the commercial side continues to be a more significant part of our spend. We don't give exact dollars but half of our success-based capex is going to the commercial and carrier areas and will continue to do so as we (continue) network expansion opportunities."

Consolidated will continue to focus on the lit fiber side of the market, even though the provider does offer dark fiber to customers. "So if somebody just wants to buy dark fiber from us we'll consider it," Udell said. "But it isn't a lead product because the managed services relationships for us (provide) good EBITDA margins. Dark fiber usually leads to a bypass and so it's a balancing act of making sure we're focusing our energies (on) a longer revenue return for us."

Consolidated's consumer segments showed continued declines. Voice connections declined 1.1 percent sequentially to 482,735, a drop of just over 5,300 customers between the third and fourth quarters. For the year, voice connections fell 4.1 percent, by 20,385 customers.

Video connections declined even faster than voice, dropping 1.5 percent between the third and fourth quarters to 117,882. For the full year, video connections fell 5.1 percent from 124,229 connection.

Data and Internet connections rose slightly, however, by 0.8 percent to 456,100 or 3,385 connections.

Overall, its consumer customer numbers declined to just 268,934, down 0.6 percent sequentially and 3.2 percent for the year. However, Consolidated's consumer ARPU rose steadily throughout the year, ending at $83.90, 16 percent higher than a year ago.

Total company revenues for the fourth quarter were $188.2 million, down from $192.6 million a year previously. For the full year, Consolidated saw revenues of $775.7 million.

For 2016, the provider expects to post capex of $125 to $130 million.

Consolidated shares remained steady in midday trading on the Nasdaq, down less than 1 percent at around $20.84.

For more:
- see the earnings release
- listen to the webcast
- see this Vista Voice article

Related articles:
Consolidated's Udell: We won't lead in metered broadband
Consolidated sees growing momentum in small cell backhaul
Consolidated says Ethernet over Copper will help it address rural business markets
Consolidated places emphasis on broadband to offset linear video declines, rising content costs

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