tw telecom: Healthy Ethernet, VPN growth drives Q3 revenue up to $344.5M

tw telecom (Nasdaq: TWTC) is finding that its mix of Ethernet and VPNs continues to be the right combination for success as the service provider reported that Q3 revenue grew total revenue 1.8 percent sequentially and 7.5 percent year over year.

Larissa Herda, tw telecom


For the quarter, the competitive provider reported $344.5 million in revenue, $125 million of modified EBITDA, and $14.6 million in net income.

"We're pleased that we've driven increased revenue growth, greater modified EBITDA and higher unlevered free cash flow than last year," said Larissa Herda, tw telecom's chairman, CEO and president in the earnings release. "Delivering on any one of those metrics is an accomplishment, but growing all three as we invest for the future, demonstrates the strength of our model and our execution."

Herda added that the key to maintaining success is to introduce new products and features that adapt to their business customers' changing requirements. Among the many new features tw telecom introduced in the third quarter was its Intelligent Network service.

Driven by an 18.6 percent increase in data and Internet services sales, enterprise revenues rose to $24.4 million, or 10 percent year-over-year. Inside the enterprise portfolio, data and Internet revenue grew 4.1 percent sequentially and 18.6 percent year over year, which was driven mainly by a 27.5 percent increase year over year in strategic Ethernet and VPN-based products.

While enterprise is the clear star performer, the service provider did see wholesale Ethernet service revenues rise $0.5 million with more sales to wireless operators and wireline service providers extending their off-net Ethernet footprint to serve more multisite customers.

Of course, there were some losses. Network services, in particular, declined 3.6 percent, a factor it attributes to churn and repricing for contract renewals largely in transport services, which tw telecom said "outpaced growth in high capacity and colocation services, and an increase in certain taxes and fees."

From a network build perspective, tw telecom ended Q3 with about 27,400 customers and about 27,000 fiber route miles (about 20,000 of that figure were metro miles).

Looking forward, the service provider expects 2011 full year capex investments of $340 to $350 million with a mix of success-based and 2011 strategic investing to be similar to 2010.

For more:
- see the release (PDF)

Earnings summary: Wireline in the third quarter 2011

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