FairPoint's Q3 Ethernet revenue gains help offset local, long-distance voice losses

For FairPoint Communications, Ethernet continues to be a key element in its financial results, and the third quarter of 2014 was no exception.

Ethernet sales contributed nearly $21.3 million of revenue, or 9.3 percent of total revenue, due to 37.5 percent year-over-year growth of retail and wholesale circuits. These results helped offset declines in legacy voice and wholesale services.

In the third quarter of 2014, Ethernet sales drove up data and Internet services revenue 7.9 percent, or $3.3 million, year-over-year. This is the seventh consecutive quarter where data and Internet services revenue increased sequentially.

The service provider added 291 retail and 664 wholesale Ethernet circuits to end the quarter with a total of 11,681 Ethernet circuits.

FairPoint said in its earnings release that growth in Ethernet products is expected to continue based on demand from customers like regional banks, healthcare networks and wireless carriers.

However, the service provider reported that voice service revenues declined $6.5 million to $94.7 million due to the loss of voice access lines combined with lower long-distance usage and the impact of promotional discounts on residential products, partially offset by price increases.

At the same time access revenues declined $3.1 million due to what FairPoint said was "continued loss and conversion of legacy transport circuits to next generation fiber-based services and revenue assurance in the third quarter of 2013 that did not recur to the same extent in the third quarter of 2014, partially offset by an increase in wholesale Ethernet revenue driven by legacy conversion and a higher year-over-year NECA cost study true-up."

Due to expected declines in local and long-distance voice and legacy wholesale services, overall company revenue was $228 million, down from $236 million in the same period a year ago.

The third quarter has been a challenging time for FairPoint as the company's union workers are moving through a work strike due to a disagreement over concessions on health care, pensions and other issues.

Looking forward, the service provider forecast that it expects to generate $100 million to $110 million of unlevered free cash flow for fiscal 2014.

Shares of FairPoint were trading at $16.27, up 9 cents or .56 percent, in Wednesday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the third quarter of 2014

Related articles:
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FairPoint's Ethernet circuits grow 48.3% in Q2, contribute $20.9M in revenue

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