SureWest's broadband services drive 3% revenue rise in Q4 2011

Broadband is SureWest's (Nasdaq: SURW) business and in Q4 2011 business was good as residential and business broadband gains drove up revenues 3 percent year-over-year to $63.5 million.

Broadband revenues grew by $4 million, or 9 percent, a factor it says more than offset a $2.1 million decline in its traditional telecom unit. The provider also reported a net income of $1.8 million and earnings per share (EPS) of 13 cents.

SureWest was trading slightly higher at midday Wednesday, up 5 cents or 0.24% to $22.50.

Of course, there were losses. The service provider's adjusted EBITDA declined 1 percent year-over-year to $21.6 million, with the broadband segment's adjusted EBITDA increasing 8 percent to account for 54 percent of total adjusted EBITDA, offsetting most of the telecom segment's adjusted EBITDA decline of 10 percent.

To offset industrywide declines in traditional telecom voice services, the service provider will continue to grow its broadband segment.

Here's a breakdown of SureWest's metrics:

  • Voice services: During the quarter, traditional telecom revenues declined $2.1 million, or 12.5 percent, year-over-year to $14.5 million due to ongoing landline voice losses. As seen with all wireline ILECs, SureWest lost 300 total revenue generating units (RGUs), ending Q4 2011 with 76,400 voice RGUs. Telecom residential revenues declined 21 percent year-over-year to $3.1 million due to a 20 percent decline in telecom voice RGUs. However, of the 5,900 year-over-year telecom residential voice RGU losses, 2,600, or 44 percent, migrated to the SureWest Broadband Voice over IP service.
  • Broadband and video services: SureWest reported broadband revenues increased 9 percent year-over-year, accounting for 77 percent of its total revenues, up from 73 percent in Q4 2010. Residential broadband revenues increased 7 percent year-over-year to $34 million due to 5 percent growth in average revenue per user (ARPU) and a 4 percent increase in RGUs.
  • Business services: SureWest's broadband business revenues rose 15 percent, or $1.8 million, year-over-year to $14.2 million. Business customers increased 3 percent year-over-year to 8,000 and ARPU grew 11 percent from 2010 to $592. As it faces growing pressure from cable operators and other CLECs in its ILEC territory, SureWest's telecom business segment revenues declined 2 percent year-over-year to $8.4 million. Overall, SureWest saw a 3 percent decline of business customers in its ILEC territory, while the medium and large business customer base "remained stable."

As for the future of SureWest, the service provider is now set to become part of fellow ILEC Consolidated Communications (Nasdaq: CNSL). Consolidated announced earlier this month it would purchase SureWest for $340.9 million in cash and stock.

The two service providers expect the deal to close in the second half of 2012 after meeting necessary federal and state regulatory approvals and getting the approval by both Consolidated and SureWest shareholders.

For more:
- see the release

Special report: Wireline in the fourth quarter 2011

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