FairPoint's Q3 revenue stays flat, sees gains in broadband, wireless backhaul

FairPoint Communications (Nasdaq: FRP), like many traditional wireline carriers, saw traditional landline voice losses continue to eat into their revenue base while it ramped up more profitable services like broadband and wireless backhaul in the third quarter of 2011.

During the quarter, the service provider reported revenue was $257.9 million, down from $262.2 million in Q2 2011.

The $4.7 million variance is attributable to two key issues. In Q2 2011, FairPoint gained a one-time $4 million revenue benefit related to the reversal of retail and wholesale quality penalties. Also, service outages due to Hurricane Irene resulted in about $0.8 million of incremental service quality penalties during the third quarter.

When each of these items are taken out of the equation, FairPoint's Q3 revenue was flat on a sequential basis because voice service line revenue declines were offset by increases in access revenue, data and Internet services revenue.  

Here's a breakdown of its key metrics:

  • Broadband service: One of the areas that continued to be a bright spot for FairPoint in Q3 was broadband service. In the third quarter, broadband subscribers grew 8.2 percent year-over-year, up from the 5.4 percent increase in Q2 2011 and a 1.7 percent decline in Q3 2010. On a year-to-date basis, the service provider added over 22,000 broadband subscribers, up from the less than 400 it added during the first nine months of 2010.
  • Landline losses: FairPoint was able to narrow voice landline loss for the sixth consecutive quarter, reaching 8.8 percent year-over-year versus 9.3 percent in the second quarter of 2011 and 11 percent in the third quarter of 2010, respectively.
  • Wholesale services: Selling wholesale wireless backhaul services is another growth area for the company. The ILEC continued to expand its wholesale fiber-to-the-tower expansion during the quarter. At the end of September, it had connected fiber to over 700 of the 800 towers it said it will serve with fiber in its territories.

Given the realities of industrywide wireline voice service declines, FairPoint had to make the hard decision to cut its employee base by 400 by the end of 2011, an initiative it believes will reduce its annual operating expenses by $34 million.

For more:
- see the release

Earnings summary: Wireline in the third quarter 2011

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