FairPoint voice-access line losses eat into Q2 revenue

FairPoint Communications (Nasdaq: FRP) on Thursday reported second-quarter financial results in which revenue declined sequentially as a result of voice access line losses and service quality penalty reversals.

Q2 revenue was $243.5 million, compared to $248.5 million in the first quarter of 2012.

The telco attributed the revenue drop to a decrease in voice-access lines and service-quality penalty reversals, which had a $1.2 million beneficial impact in Q1 2012. Additionally, access revenue declined slightly because growth in special access services such as wireless backhaul for wireless operators offset continued declines in switched access.

Despite these losses, FairPoint saw that the increases in broadband subscribers and Ethernet product revenues led to a $2.8 million increase in overall data and Internet services revenue.

Here's a breakdown of FairPoint's key performance metrics:

  • Broadband services: Buoyed by ongoing build outs in its three New England regions, broadband continues to be a growth engine for FairPoint. During the quarter, broadband subscribers grew 5.1 percent sequentially. Over the past year, the service provider has added over 15,000 broadband subscribers as penetration reached 32.2 percent of its voice access lines as of the end of this June.

  • Landline losses: The ILEC was able to narrow its voice-access line losses for what it said was the ninth consecutive quarter, reaching 7.8 percent year-over-year and 1.8 percent sequentially. At the end of the quarter, it had a total of 995, 297 switched access lines, down from 1,013,035 in Q1 2012.

  • Business services: A key driver in FairPoint's business services mix was Ethernet services, which contributed about $10.2 million of revenue in Q2 2012, up from $9.0 million in Q1 2012 and $2.6 million in Q2 2011. The company expects that the growth of its Ethernet products will continue as regional banks, healthcare networks and wireless carriers transition away from legacy technologies like Frame Relay and ATM.

FairPoint expects to generate Unlevered Free Cash Flow (after cash pension contributions) of $90 million to $100 million in 2012 through a continued focus on improving Consolidated EBITDAR margins and disciplined capital spending.

Shares of FairPoint were trading at $5.83, down 0.24, or 3.95 percent in Friday mid-morning trading on the Nasdaq.

For more:
- see the release

Special Report: Wireline in the second quarter of 2012

Related articles:
FairPoint gets $2M CAF grant to extend broadband service in Vermont
FairPoint fights copper theft in its New England territory
FairPoint plans to enable 19 Vt. towns with broadband DSL service
FairPoint to sell off its Northern New England payphone operations
FairPoint's Q1 2012 revenue stabilizes as broadband, Ethernet services grow

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