FairPoint's data, Internet services revenue grow 11 percent to $40 million

FairPoint Communications (Nasdaq: FRP) reported that data and Internet services grew 11 percent year-over-year and 5 percent sequentially in Q2 2013 to $40 million, a factor that helped to offset ongoing declines in its legacy residential voice products.

Data and Internet growth was seen in both the residential and business domains.

For the fourth consecutive quarter, broadband subscribers grew 4.2 percent year-over-year and 0.8 percent sequentially. Over the past 12 months, the telco added over 13,000 broadband subscribers with penetration reaching 36.4 percent of its voice access lines as of the end of June.

In the business and wholesale arenas, the story was once again driven by Ethernet, which contributed about $14 million of revenue, up from $10 million in the same period a year ago. Retail and wholesale circuits grew 49.2 percent year-over-year.

FairPoint said that it expects continued growth of its Ethernet products as more of its regional banks, healthcare networks and wireless carrier customers migrate away from lower speed Frame Relay and T1 circuits.

Wireless backhaul, in particular, will be big part of future wholesale Ethernet sales. Earlier this year, the service provider issued a forecast that its Ethernet-based fiber to the tower (FTTT) business in northern New England--including Maine, New Hampshire and Vermont--will grow over 39 percent in 2013.

Although voice access lines did decline, it did narrow those losses to 7.5 percent year-over-year compared from 7.8 percent in the same period a year ago. It attributes the access line improvement due to a "slowdown in the rate of loss in business voice access lines, which declined 2.1 percent year-over-year as compared to 3.3 percent a year ago."

During the second quarter, it cut workforce by 66 employees as the result of a previously announced workforce reduction. This workforce reduction included about 30 management personnel during Q1 2013 and 90 bargained-for positions in fiscal year 2013. FairPoint said that these efforts will save the company about $11 million in annual operating expenses.

In addition, the telco plans to stop participating in the National Exchange Carrier Association (NECA) in its special access rate of return pool for wholesale DSL services for a number of its rural operating telephone companies. Starting next quarter, this change will reduce revenue by $1.7 million while increasing Adjusted EBITDA by over $140,000 per quarter.

From an overall financial standpoint, FairPoint's revenue declined less than $1 million in Q2 to $235 million.

Shares of FairPoint were listed at $8.59, down 18 cents, or 2.05 percent, in late Monday afternoon trading on the Nasdaq stock exchange.  

For more:
- see the earnings release

Special report: Wireline telecom earnings in the second quarter of 2013

Related articles:
Tier 2 telcos hunt for new fortunes in wireless backhaul segment
FairPoint expands DSL coverage in parts of Maine, Vermont
FairPoint to build next-generation 911 system for state of Maine
FairPoint Q1 data, Internet services revenue grow to $38.1 million
FairPoint promotes Fastiggi to president of Vermont operations

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