FairPoint narrows Q4 losses, grows broadband, wireless backhaul footprint

FairPoint Communications (Nasdaq: FRP) continues to make progress in its life after bankruptcy with Q4 2011 revenue of $254.2 million, down from $257.9 million in Q3 2011, but surpassing analyst estimates of $247.9 million.

What contributed to the $3.7 million decline in quarterly revenue was a $4.4 million decline in access revenues due to certain billing reserves established in the fourth quarter, offset by a $1.2 million increase in voice services revenue from a $3.9 million reversal of service quality penalties in its New England service territory.  

The service provider also narrowed its losses to $84 million in Q4 2011, down from $279.4 million in Q3 2011.

For the full year 2011, it reported net income of $172 million, including the cancellation of debt income.

Here's a breakdown of its key metrics:

  • Broadband service: The service provider's broadband subscriber base grew 8.4 percent year-over-year, up from the 0.4 percent year-over-year it reported in 2010. In 2011, FairPoint added over 24,000 new DSL subscribers, far more than the 1,300 it added in 2010. As of the end of December, it enabled 30.4 percent of its voice access lines as it surpassed 314,000 high-speed Internet subscribers in service.
  • Landline losses: While traditional voice lines will continue to decline, FairPoint did manage to narrow losses for a seventh consecutive quarter, reaching 8.4 percent year-over-year versus a 10.3 percent decline in 2010.
  • Wholesale services: In response to the growth of area wireless operator's 3G and upcoming 4G wireless networks, FairPoint expanded its fiber to the tower footprint (FTTT) to over 800 towers as of the end of 2011.

Looking forward to 2012, FairPoint expects to generate unlevered free cash flow (after cash pension contributions) of $90 million to $100 million in 2012, which it says will achieve through "a continued focus on improving EBITDAR margins and disciplined capital spending."

One of the key assets that FairPoint has in its New England arsenal is its fiber network. To date, the service provider has built out over 14,000 route miles of fiber.

Paul Sunu, FairPoint's CEO said this "next-generation network is at the core of our strategy to transform the composition of our revenue for growth, to win back business customers and to meet the growing demand for bandwidth."  

Barry Sine, managing director of equity research at Drexel Hamilton, wrote in a report that even though FairPoint still has a lot of work to do in convincing industry watchers it can thrive, its Q4 earnings is a good sign of the progress it has made since emerging out of bankruptcy last year.  

"FRP shares have continued to come under pressure, with the bear thesis being that the company will fall on its face again," he wrote. "We think it will take time for management to convince skeptics, but that this quarter was a step in the right direction."

For more:
- see the earnings release

Special report: Wireline in the fourth quarter 2011

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