Hawaiian Telcom sees 43% of internet customers purchasing 21 Mbps to 1 Gbps speeds

Hawaiian Telcom is seeing more of its copper and growing fiber-based broadband customer base purchase higher speed services.

Speaking to investors during its first quarter earnings call, Scott Barber, CEO of Hawaiian Telcom, said throughout its total internet subscriber base the adoption of higher speed offerings continues to rise.

"Today, approximately 43 percent of our total residential internet customers are 21-meg to 1-gig speed compared to 33 percent in the same period a year ago and 22 percent in the same period just two years ago," Barber said during the earnings call, according to a Seeking Alpha transcript. "Through bonding and other programs, we are working on rolling out higher upload and download speeds in our copper and neighbor island footprint."

Hawaiian Telcom ended the first quarter with about 92,800 Internet subscribers and customer adoption of higher speed offerings continued to increase. 

Similar to a trend seen at its larger ILEC brother CenturyLink (NYSE: CTL), Hawaiian Telcom is seeing more of its IPTV customers purchase broadband services. As of the end of March, about 94 percent of all of the telco's video subscribers had double- or triple-play bundles with internet.

"On the broadband internet side, we continue to see good results on Oahu, where we have our NGN footprint," Barber said. "Internet attachment rate with TV continues to be strong and total Oahu internet subscribers grew nearly 4 percent year-over-year in the first quarter."

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

Consumer Revenue: Consumer revenue remained flat at $36.2 million as growth of Hawaiian Telcom TV and broadband internet services offset year-over-year declines in consume legacy voice and low-bandwidth internet services. First quarter consumer strategic revenue rose 9.6 percent year-over-year and now represents 47 percent of total consumer revenue, up from 43 percent in the same period a year ago, and 35 percent in the same period two years ago.

Video services remained strong in the quarter, growing over 25 percent year-over-year to $9.4 million due to the addition about 7,400 new IPTV subscribers, ending the quarter with about 37,100 subscribers. During the quarter, the telco enabled 5,000 additional households with fiber, increasing the total number of households to 195,000 with 61 percent of those capable of using fiber-to-the-premises (FTTP) technology.

Hawaiian Telcom TV penetration of households was 19 percent at the end of the first quarter, up from 17.9 percent year-over-year. Alternatively, internet services revenue overall declined $0.4 million from the same period a year ago mainly due to promotional pricing. 

Business Revenue: Driven by strong growth in data services and data center services, first quarter business revenue rose 4.4 percent year-over-year to $44.8 million. Within the business segment, services revenue increased 24.1 percent year-over-year, due to one-time charges from two large institutional customers, as well as higher customer demand for IP-based data services such as Dedicated Internet Access, IP-VPN and business VoIP, as reflected in the growth in data lines and BVoIP lines. 

Business data lines increased 1.7 percent year-over-year to approximately 20,000 lines.  In particular, BVoIP lines grew 24.5 percent to approximately 17,300 lines, offsetting nearly half of voice access line decline.  Revenue from data center services increased 17.7 percent for the first quarter, driven by hardware sales, network and colocation services. 

Hawaiian Telcom noted that revenue increases from strategic services and equipment and managed services more than offset the year-over-year decline in business legacy voice services.

Wholesale Revenue: Hawaiian Telcom's wholesale revenue declined year-over-year to $13.8 million. As seen in previous quarters, the revenue decline was related to wireless operator customers disconnecting copper-based services and moving to fiber-based, higher bandwidth Ethernet circuits on multi-year contracts.

Regardless of the near-term losses, Barber said that it won a number of new fiber-to-the-tower contracts and is working to pursue opportunities for the SEA-US trans-Pacific submarine cable system in which it is participating as a consortium member.   

"In the wholesale channel, our strategy is to leverage our fiber network to drive Ethernet growth in both wireline and wireless wholesale segments, be the provider of choice for the wireless carriers and expand services and solutions for the trans-Pacific market," Barber said. "As of the end of the first quarter, we have completed the backhaul to 462 fiber-to-the-tower cell sites and we have another 59 sites under contract to build. We are also actively pursuing a number of additional sites."

Hawaiian Telcom's first quarter revenue rose 1.7 percent year-over-year to $98.8 million as growth in business data services and consumer video more than offset the impact of voice access line declines. 

For more:
- see the earnings release
- here's the Seeking Alpha earnings transcript

Special report: Verizon and Frontier begin new transitions: Tracking wireline telecom earnings in Q1 2016

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