Hawaiian Telcom saw the fruits of its FTTH expansion as its consumer internet subscriber base surpassed the losses in its copper-based DSL service lines, but these gains weren’t enough to offset the overall $1.6 million year-over-year consumer segment decline.
The telco reported that total consumer internet subscribers jumped 0.9% compared to fourth-quarter 2016, marking the first year-over-year subscriber growth in nearly two years as high-bandwidth fiber subscriber increases outweighed low-bandwidth copper subscriber declines.
A big element of that growth was the adoption of higher speed services.
The number of internet subscribers on packages with 100 Mbps to 1 Gbps fiber speeds grew 81.4% year-over-year and 16.6% sequentially. Internet services revenue for the fourth quarter was down slightly year-over-year but up 2.6% quarter-over-quarter.
Scott Barber, president and CEO of Hawaiian Telcom, said in the earnings release that strategic services makes up more than half of its consumer revenue mix.
“In the fourth quarter, we continued to strategically invest in our network and transform our revenue streams from legacy to strategic services,” Barber said in the earnings release. “In the consumer consecutive quarter of year-over-year TV subscriber growth and the best quarter for Internet net adds since the beginning of 2013.”
Consumer strategic revenue is now 52% of Hawaiian Telcom’s total consumer revenue, up from 46% in 2016, a factor Barber said is related to its ongoing FTTH expansion effort.
“These results demonstrate the strong customer demand for our superior fiber product suite and highlight the fact that where we have fiber, we ultimately win,” Barber said. “With an inventory of 206,000 fiber-enabled homes on O‘ahu, we have ample opportunity to continue to increase penetration in our market.”
Here’s a breakdown of Hawaiian Telcom’s key metrics:
Business services: Fourth-quarter business revenue was $42.1 million, down $2.2 million year-over-year but up $0.3 million sequentially. The year-over-year change was driven by lower levels of equipment sales and the decline in legacy voice and low-bandwidth Internet services, as well as lower average revenue per unit on certain data services due to promotional pricing.
These decreases were partly offset by continued growth in high-bandwidth fiber Internet and data services, as well as a 15% year-over-year increase in business VoIP revenue, driven by strong demand for Hawaiian Telcom’s hosted voice solution.
In the fourth quarter, demand for the service provider’s high-bandwidth fiber internet products continued to grow. The number of business internet subscribers on packages with 50 Mbps to 1 Gbps speeds grew 57.4% year-over-year and 17.2% sequentially. During the quarter, approximately 2,000 additional small business addresses were GPON-enabled, increasing the total number of enabled business addresses to over 11,000 as of Dec. 31, 2017.
Consumer: Fourth-quarter consumer revenue totaled $33.5 million, down $1.6 million year-over-year and flat sequentially. Revenue growth in the quarter from Hawaiian Telcom TV and high-bandwidth fiber internet services was more than offset by the year-over-year revenue decline in legacy voice and low-bandwidth copper Internet services. Fourth-quarter consumer strategic revenue hit $17.9 million, up 2.1% year-over-year and 0.9 percent sequentially, driven by strong demand for the service provider’s strategic fiber-based products.
Hawaiian Telcom TV continued to lead revenue growth in the consumer channel. Video services revenue grew 4.1% year-over-year to $11.1 million for the fourth quarter and has become a $45 million and growing annualized revenue stream. Video subscribers grew 8.7% year-over-year, ending 2017 with approximately 45,200 subscribers, 25% it says were bulk multi-dwelling unit (MDU) video subscribers on multiyear contracts. When combined with approximately 7,800 additional single-play and double-play non-TV internet subscribers on our NGN footprint, the penetration rate in our NGN footprint was about 26% at the end of 2017, up from 23% at the end of 2016.
During the fourth quarter, Hawaiian Telcom fiber-enabled 1,000 additional consumer households on O‘ahu, including success-based bulk MDUs and greenfield single-family homes, bringing total NGN households to 206,000, or approximately two-thirds of the total marketable households on O‘ahu. About 64% of the Company’s NGN households cloud-use FTTH technology.
Wholesale: Fourth-quarter wholesale revenue totaled $12.7 million, down $0.5 million year-over-year but up $0.2 million sequentially. Hawaiian Telcom reported revenue from high-bandwidth, multiyear contract wholesale services including Ethernet, transpacific fiber circuit capacity, and optical transport services increased 41.3% year-over-year and now represents 37% of total wholesale revenue, up from 25% in the same period a year ago. This revenue growth was offset by the revenue decline from certain wholesale customers disconnecting low-bandwidth, less efficient legacy circuits on month-to-month service.
Financials: Hawaiian Telcom reported fourth-quarter revenue was $91.6 million, down $5.2 million year-over-year but up $0.6 million sequentially. The telco said the year-over-year change was due to revenue growth in consumer video, business VoIP, and high-bandwidth fiber internet and data services being more than offset by revenue declines associated with legacy voice and low bandwidth internet and data services, as well as lower levels of equipment sales.
The company also incurred a $9.1 million net loss, or $0.78 per diluted share in the fourth quarter of 2017, compared to a net loss of $0.2 million, or 2 cents per diluted share in the fourth quarter of 2016. Adjusted EBITDA for fourth-quarter 2017 was $24.7 million.