FairPoint Communications (Nasdaq: FRP) on Friday reported that Q3 2012 revenue was $242.1 million, down sequentially from $243.5 million, as the expected decline in voice service revenue was partially offset by residential broadband as well as Ethernet services for businesses and wholesale carrier customers.
The telco said that operating expenses were $186.4 million in the third quarter of 2012, down from $190.7 million in Q2 2012. It attributed the decline in operating expenses to a decrease in employee expenses, cost of goods sold and bad debt.
Meanwhile, EBITDA declined to $73.7 million in Q3 2012 from $76.1 million in Q2 of 2012. FairPoint said the decline was the result of a decrease in revenue along with the benefit received during the second quarter of 2012 from the favorable settlement of certain bankruptcy claims.
Paul H. Sunu, CEO of FairPoint, was upbeat about the telco's progress in the third quarter.
"It is clear from this quarter's results that our 'four pillar' strategy is taking hold," Sunu said in the earnings release. "We expect to exceed our full year guidance and we are generating free cash flow. As a result, we were able to make a $25 million voluntary prepayment of debt in the quarter reflecting our desire to delever and increase shareholder value."
Here's a breakdown of FairPoint's key wireline service performance metrics:
Broadband services: Broadband continues to be a growth engine for FairPoint, and Q3 was no different. Buoyed by ongoing broadband buildout drives in its northern New England market territories, broadband subscribers grew 3.2 percent year-over-year and 0.5 percent sequentially. Over the last year, the telco added 10,000 broadband subscribers as penetration reached 33.1 percent of voice access lines as of the end of this September. At the end of the quarter, FairPoint had a total of 322,551 broadband subscribers.
Landline losses: While FairPoint continued to see landline losses in Q3, the telco was able to cut them to 3.3 percent for the 12 months ended Sept. 30, 2012, which it said is nearly half the 6.3 percent loss it saw in the twelve months ended Sept. 30, 2011. Likewise, business voice access lines declined only 0.9 percent sequentially versus June 30, 2012. The telco ended the quarter with $111, 337 in voice revenue and had a total of 974,320 access lines.
Business/Wholesale services: As seen in Q2 and other quarters, a big contributor to FairPoint's business services mix was Ethernet services. Ethernet services contributed about $10.7 million of revenue in Q3 2012, up from $10.2 million in Q2 2012 and $4.2 million in Q3 2011. FairPoint said that it expects further growth in both retail and wholesale Ethernet as "regional banks, healthcare networks and wireless carriers transition away from legacy technologies like frame relay."
Having generated unlevered free cash flow (after cash pension contributions and OPEB payments) of $95.2 million during the first nine months of this year, FairPoint said it exceeded its guidance of $90 million to $100 million for the full year.
FairPoint was listed at $7.60, up $0.49, or 6.89 percent, in morning trading on the Nasdaq stock exchange.
- see the earnings release
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