Hawaiian Telcom's Q2 consumer revenues rise to $36.3M on broadband, TV growth

Hawaiian Telcom's second-quarter story was once again dominated by its consumer segment, where the telco reported that revenue was $36.3 million, up 4.3 percent year-over-year due to revenue growth from its TV and high-speed Internet (HSI) services. 

The service provider said that the ongoing buildout of its last mile fiber-based network has become the "catalyst" in driving video and HSI services, which is more than offsetting declines from legacy services. 

"Our second quarter results closed the first half of 2014 on a strong note, highlighted by the highest number of Hawaiian Telcom TV subscriber additions since its launch a little over three years ago," said Eric K. Yeaman, Hawaiian Telcom's president and CEO, in the earnings release. "Hawaii's best entertainment experience can now reach 142,000 households on Oʻahu and awareness for the service is steadily growing, giving us positive momentum and positioning us to further increase our video market share."

The service provider saw similar gains in the business segment, particularly in next-gen services such as Ethernet. Similar to its larger ILEC counterparts AT&T (NYSE: T) and Verizon (NYSE: VZ), business revenues declined slightly due to a decrease in equipment, managed services and legacy revenues.

Here's a breakdown of the telco's key metrics:

Broadband and Video:  Consumer HSI revenue rose in the quarter to $2.6 million as the overall subscriber base rose to a total of about 91,400 customers, which was primarily driven by HSI pull-through rates from new video subscribers and standalone HSI subscriber additions. As of the end of June, about 54 percent of all of Hawaiian Telcom's video subscribers had a triple-play bundle and about 91 percent had double- or triple-play bundles. Per the industry-wide trend, revenue increases from video and HSI were partially offset by legacy revenue declines related to consumer access and long distance line losses of 8.4 percent and 7.7 percent, respectively.

Likewise, video service revenue grew 2.9 percent year-over-year to $5.5 million, driven by the addition of approximately 9,500 subscribers for a total of approximately 23,100 subscribers at the end of the second quarter. Hawaiian Telcom TV average revenue per user (ARPU) was up nearly 11.4 percent year-over-year and 2.6 percent when compared to the first quarter of 2014. During the quarter, the service provider enabled an additional 12,000 customers with IPTV, increasing the total number of households enabled to 142,000 with over 50 percent of those households capable of connecting directly to the company's fiber-based broadband technology. At the end of the second quarter, Hawaiian Telcom TV penetration of households enabled was approximately 16.3 percent. 

Business segment: Business revenue was $42.1 million, down $0.5 million from the same period a year ago, primarily due to a $2.4 million year-over-year decrease in equipment and managed services revenue, mostly related to a $1.8 million sale of equipment to a large Hawaii-based private school in the second quarter of 2013. Also, a year-over-year decline in legacy business access and long distance revenues contributed to the business revenue decline. However, Hawaiian Telcom said these decreases were largely offset by $2.1 million of incremental net revenue added as a result of the SystemMetrics acquisition and a 4.6 percent year-over-year increase in business data revenue driven by higher demand for IP-based data services.

Wholesale segment: Wholesale revenue was $15.8 million, down $0.5 million year-over-year to $14.3 million. The telco attributes the decline to a number of its wireless carrier customers replacing their bandwidth legacy copper-based T-1 circuits with fiber-based, higher bandwidth Ethernet circuits. Likewise, switched carrier access revenue declined $0.2 million year-over-year to $1.5 million, which it also attributes to the overall decline in access lines and minutes of use and the impact of intercarrier compensation reform.

Overall second-quarter 2014 revenue was $96.8 million, up from $97 million in the second quarter of 2013. Next-gen video, HSI and $2.1 million of net incremental data center services revenue from SystemMetrics revenue was offset by a $2.4 million decrease in equipment and managed services revenue, related to lower customer premise equipment sales, and a 5.5 percent decline in access lines. 

Shares of Hawaiian Telcom were $27.97, down 67 cents or 2.34 percent, in Monday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the second quarter of 2014

Related articles:
Hawaiian Telcom passes another 130,000 households with IPTV, adds 8,600 subscribers
Hawaiian Telcom gets hit with seventh instance of copper theft
Hawaiian Telcom's consumer revenue rises 4% to $36.4M on strong video, broadband adds
Hawaiian Telcom to serve up 500 Mbps consumer broadband service

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