Hawaiian Telcom Q1 2012 results benefit from 5.4% rise in business revenues

Hawaiian Telcom (Nasdaq: HCOM) reported first-quarter 2012 revenue of $97.6 million, down 1 percent from $98.5 million year-over-year, as continued growth in video, business data and consumer broadband offset the impact of expected access line loss.

The Hawaii-based telco's adjusted EBITDA remained unchanged from the same period, at $28.6 million.

Net income, meanwhile, was $0.2 million, or $0.02 per diluted share. Company net income was impacted by a one-time $5.1 million charge to pay down debt related to the refinancing of its $300 million term loan. Taking out the $5.1 million one-time charge, pro-forma net income was $5.3 million, down from $5.5 million in the same period a year ago.

Here's a breakdown of its key unit results:

  • Landline loss: Consumer revenue was $33.6 million, down $1.7 million, due to the ongoing decline of legacy local and long distance services, partially offset by growth in video and consumer High Speed Internet (HSI) broadband data revenue. Total landline voice lines declined sequentially 1.9 percent, to 408,883 lines. To offset landline voice declines, the telco plans to continue growing its next-generation services: including broadband, business services, and its newly launched IPTV service.
  • Broadband and video: Broadband and video continues to be a hot seller in its consumer portfolio. Driven by video bundle sales and enhancements to the broadband network, consumer HSI subscribers increased 2.7 percent year-over-year, to 85,500. Meanwhile, TV subscriber penetration increased to over 9 percent of the 41,200 homes it enabled so far, up almost 6 percent of the 27,400 households enabled at the end of 2011. An additional key contributor to video growth was that it was able to secure six new bulk multi-dwelling unit (MDU) contracts adding about 1,100 units, increasing its total to 13 bulk MDU contracts and over 3,000 units.
  • Business Services: Buoyed by equipment sales and managed services revenue, business revenue increased 5.4 percent year-over-year, to $42.1 million. Two other factors that contributed to growth of the telco's business segment was the ongoing demand for IP-based data services--including Ethernet, IP VPN and Dedicated Internet Access (DIA) services and broadband--which rose 9 percent and 6 percent, respectively.  
  • Wholesale: The ongoing migration from legacy TDM to IP services continues to be a drag on the ILEC's wholesale revenue, which declined 4.1 percent year-over-year, to $18.6 million. Wholesale carrier data revenue declined 3.6 percent year-over-year, to $16.2 million, a factor it attributed to a number of wireless operators replacing their lower bandwidth legacy circuits with fiber-based Ethernet circuits. At the same time, switched carrier access revenue declined 7.1 percent year-over-year, to $2.4 million, a factor that's mainly the result of an overall decline in traditional access lines.

Eric Yeaman, Hawaiian Telcom's president and CEO, recognized in the earnings release that like other ILECs, his company is also going through its share of legacy to next-gen service growing pains.     

"Our results reflect the expected decline in certain legacy revenues, but the investment we continue to make in our broadband infrastructure is increasing our capabilities, expanding our product portfolio and better positioning us to grow next-generation revenue," Yeaman said.

Hawaiian Telcom's shares were trading Friday morning at $20.30, down 0.20, or 0.98 percent, on the Nasdaq.

For more:
- see the earnings release (.pdf)

Special Report: Wireline in the first quarter of 2012

Related articles:
Hawaiian Telcom introduces managed security bundle for SMBs
Hawaiian Telcom's Q4 2011 gains in business, broadband and wholesale offset landline revenue declines
Hawaiian Telcom migrates to Nasdaq Global Market
Hawaiian Telcom saves $6M by refinancing debt

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