EarthLink business service focus drives 146% revenue increase

EarthLink (Nasdaq: ELNK) bet on enhancing its business services portfolio continues to pay off in the third quarter as revenues rose 146 percent year-over-year. However, revenue declined sequentially by 2 percent, to $357.3 million, from Q2 2011.

Buoyed by its acquisitions of ITC^Deltacom and One Communications, business services now represent 74 percent of EarthLink's Q3 2011 revenues versus only 23 percent in the same period a year ago.

Recently, the service provider made a number of enhancements to its network to support business customers. Among those enhancements were the buildout of two new OC-192 10 Gigabit Ethernet (GigE) fiber rings, new access points for private VoIP network traffic, nationwide IP MPLS and wireless-based EVDO wireless network expansions.

"We are making a number of investments in network, capabilities and people to execute on that growth strategy, including launching new nationwide integrated products later this quarter and continuing to build out our managed services infrastructure and capabilities," said Rolla P. Huff, chairman and CEO, in the earnings release.

While business services is clearly a growing focus for EarthLink, the service provider's consumer business continues to perform well with broadband services making up 65 percent of consumer access revenue in Q3 2011.

Overall residential subscriber churn in the consumer segment was 2.7 percent, slightly higher than 2.6 percent in Q2 2011 and lower than the 3.1 percent in Q3 2010.

Looking forward, EarthLink raised its full year 2011 estimates. For the year, it has forecast adjusted EBITDA of $325 million to $330 million; operating cash flow of $210 million to $225 million; capital expenditures of $105 million to $115 million; and net income of $29 million to $33 million for the full year 2011.

For more:
- see the release

Earnings summary: Wireline in the third quarter 2011

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