FairPoint lowers line loss, grows broadband and wireless backhaul in Q2

FairPoint Communications (Nasdaq: FRP) may have taken another hit in revenues due to the inevitable decline in voice lines, but those losses were accompanied with broadband and wireless backhaul network expansion.

During Q2 2011, FairPoint reported revenue of $262.6 million, down from $271.6 million a year earlier, due primarily to the result of a 9.3 percent year-over-year decline in traditional PSTN lines. The service provider lost about 22,700 lines in Q2 2011 down from about the 24,900 and about 29,100 it lost in Q1 2011 and Q2 2010, respectively.

Landline losses were offset by a number of factors, including lower service quality penalties, revenue assurance activities--including back-billing--and a 3.1 percent increase in broadband data revenue.

With the addition of over 7,600 new broadband subscribers in the second quarter, FairPoint's overall broadband subscriber penetration increased to 28.3 percent of its telephone lines as of the end of June. As of the end of the quarter, FairPoint reported it had over 305,000 broadband subscribers.

FairPoint's broadband growth increased 5.4 percent year-over-year, up from a 4.8 percent increase in Q1 2011 and a 1.9 decrease in Q2 2010.

During the quarter, it reported that it made continual progress in expanding its broadband service reach in both New England and other areas of its 15-state territory. In New England, FairPoint said it now provides broadband service to over 83 percent of its capable phone customers in Maine, over 85 percent in New Hampshire, and about 90 percent of its customers in Vermont. Outside of New England, FairPoint reported that it delivers broadband to about 90 percent of its current customer base.  

Outside of the consumer market, FairPoint made progress in building out its fiber network to serve wholesale wireless backhaul opportunities and expanding its VantagePoint IP/MPLS core network for business customers.

Wireless backhaul has been a major initiative for FairPoint. Earlier this year, FairPoint announced that it would bring fiber to over half of the 1,600 wireless towers it serves in its northern New England territory. At the end of June, FairPoint said it had laid fiber to over 400 of these 1,600 towers and is on track to bring fiber to an additional 400 sites by the end of 2011.  

David D. Tawil, Co-Founder & Portfolio Manager, Maglan Capital said in an e-mail to FierceTelecom that "over time fiber to the tower could add $15-30 million of EBITDA."

Tawil added that the service provider's ongoing improvements and the ongoing M&A trends taking place in the ILEC industry make FairPoint a potential takeover target.

"Industry consolidation continues to be a theme and FairPoint can become an attractive candidate to Frontier (NYSE: FTR) and CenturyLink (NYSE: CTL)," said Tawil. "In addition, as the Northern New England business continues to stand firmly on its own, the legacy FairPoint business (Telecom Group) may be a valuable asset available for sale."

For more:
- see the earnings release

Earnings summary: Wireline in the second quarter 2011

Related articles:
FairPoint extends its Vermont broadband reach, but is it enough to satisfy customers?
FairPoint close to reaching VT broadband expansion goals
FairPoint expands broadband network availability in New Hampshire
FairPoint strikes up fiber, Ethernet-based wireless backhaul in New England

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