Hawaiian Telcom’s consumer revenue dips slightly to $36M due to promotional internet pricing, speed declines

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Hawaiian Telcom is weathering what appears to be a short-term squall in internet services, reporting a second quarter revenue drop as some customers came off promotional pricing programs.

As a result of the pricing change, second quarter internet services revenue declined $0.9 million year-over-year. The telco ended the period with a total of nearly 91,800 internet subscribers.

Despite the near-term slow down, Hawaiian Telcom noted that the number of customers on 21 Mbps to 1 Gbps speeds increased by 25 percent over the last year and 80 percent over the last two years. As of the end of June, approximately 94 percent of all video subscribers had double- or triple-play bundles with internet. 

Additionally, Hawaiian Telcom continued with its FTTH strategy in the second quarter, enabling 3,000 additional households with fiber. As of the end of the quarter, Hawaiian Telco built out fiber to 3,000 additional households, increasing the total number of households enabled to 198,000 with 62 percent of those households capable of using fiber-to-the-premises (FTTP) technology. 

Here’s a breakdown of Hawaiian Telcom’s key metrics:

  • Consumer: Hawaiian Telcom’s second quarter consumer revenue was $36 million, down from $36.5 million in the second quarter of 2015. The service provider noted growth in the quarter from Hawaiian Telcom TV and high-bandwidth internet services was “more than offset by the year-over-year revenue decline in consumer legacy voice and low-bandwidth Internet services.” Meanwhile, second quarter strategic consumer revenue rose 5.2 percent year-over-year and now represents 48 percent of total consumer revenue, up from 45 percent in the same period a year ago, and 37 percent in the same period two years ago.

    Driven by the addition of approximately 6,700 subscribers, video services revenue grew $10 million, up 20.7 percent from $8.3 million in the same period a year ago. Hawaiian Telcom ended the second quarter with approximately 38,600 subscribers in service.  Hawaiian Telcom TV's penetration of households increased to 19.5 percent at the end of the first quarter, up from 18.2 percent at the end of the second quarter of 2015. 
  • Business services: Second quarter business revenue was $46.7 million, up 9.7 percent from the second quarter of 2015, a factor Hawaiian Telcom said was driven by solid growth in broadband data services and data center services. Data services revenue increased 40.2 percent year-over-year, partly due to $2.9 million in non-recurring revenue recognized in the quarter. This non-recurring revenue resulted from the large government agency contract awarded last year that connected 250 statewide locations. 

    Additionally, customer demand for IP-based data services such as Dedicated Internet Access, Ethernet, IP-VPN and BVoIP continued to rise. BVoIP lines, in particular, grew 17.0 percent year-over-year to approximately 18,100 lines, offsetting nearly half of total legacy voice access line decline. Revenue from data center services increased 15.3 percent year-over-year for the second quarter, due to network services and hardware sales. 

    A rise in customer demand for higher bandwidth and integrated communications solutions drove second quarter business strategic revenue growth to 35.4 percent year-over-year and now represents 42 percent of total reported business revenue, compared to 34 percent in the same period a year ago, and 31 percent in the same period two years ago. Strategic services and equipment and managed services gains more than offset the year-over-year decline in business legacy voice services.
  • Wholesale: Hawaiian Telcom’s second quarter wholesale revenue was $13.2 million, down from $13.8 million in the second quarter 2015.  Similar to earlier quarters, Hawaiian Telcom attributes the revenue decline to some of its wholesale customers disconnecting lower bandwidth legacy circuits on month-to-month rates and moving to fiber-based, higher bandwidth Ethernet circuits on multi-year contracts.

Driven by strong business growth and consumer video, total second quarter revenues were $99.5 million, up 3.5 percent year-over-year from $96.2 million in the second quarter of 2015. 

Shares of Hawaiian Telcom were listed at $23.32, up $1.12, or 5.05 percent in Monday morning trading on the Nasdaq stock exchange.


Special report: Tracking wireline telecom earnings in Q2 2016

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