Broadwing posts best-ever quarter

Continuing a trend among competitive carriers, Broadwing today announced the strongest EBITDA performance in its corporate history, based largely on increases in data/broadband revenues and significant cost-cutting measures.

The competitive service provider announced positive EBITDA before adjustments of $6.1 million, exceeding its projections.

Overall, revenues grew only slightly from $224 million to $224.3 million, but that included a 9% or $10.5 million increase in data/broadband revenue from the previous year. The net loss for the quarter was $11.7 or 13 cents per share, down 70% year-over-year from the previous year. CFO Lynn Anderson attributed the net loss improvement to cost reductions, and decreased depreciation, amortization, restructuring and interest expenses.

“Strong year-over-year data/broadband revenue growth was driven primarily by sales of our new Converged Services and by increased demand across virtually all of our broadband product set, but particularly for high-speed optical circuits,” said Lynn Anderson, chief financial officer of Broadwing. “Recent broadband revenue growth came mostly from enterprise customers.
The improvements in operating loss and net loss we reported this quarter are primarily the result of our successful efforts to reduce costs by improving the efficiency of our network.”

The increase in data/broadband services was offset by a 7% decline in voice revenues, he said. This was due to reduction in minutes of use and special one-time items in the second quarter of 2005. Overall, Broadband posted $125.7 million in revenue from data and broadband or 56% of its total and $98.4 million in revenue from voice or 44% of the total.

Anderson and Scott Widham said Broadwing is currently in the process of installing multiple Optical Carrier circuits for both carrier and enterprise customers and is seeing its best-ever results in that area.

Broadwing improved its operating margin by 400 basis points, Anderson said, largely by network improvements that reduced the cost of carrying voice traffic and completion of the Focal acquisition by eliminating duplicate hubs.

“We put a lot of work into this, and some of this came in faster than we had expected,” Anderson told analysts. “Is it sustainable? Yes, we are very focused on making sure we do maintain the gross margin for the long term. On voice, we put a lot of tools in place over the last nine months, on how we manage that, and in the second quarter, saw that come in. I look at that, and I am very encouraged. There is no specific major project left to do, but in operations, we continually run simulations to see how we can do things better. It has become more of a way of life for us.”