SureWest Communications puts broadband on sure footing

SureWest Communications reported fourth quarter earnings today highlighting an 18% increase in broadband revenue that took the broadband segment to its first full quarter of positive EBITDA.

The Roseville, Calif., company also posted an 11% penetration rate for high-definition TV subscribers and announced the launch of a 50 Mbps data product. Consolidated revenue grew by 2%.

Revenue from SureWest’s telecom segment still accounts for 58% of consolidated revenue. However, Steve Oldham, president and CEO of SureWest said that segment continues to experience decline inline with or lightly better than the industry average. Access lines declined by 1% in the quarter compared to 3% in the same quarter in 2005.

The company completed the restructuring of its sales organization in the fourth quarter and released 20 new or upgraded products. “We are pleased with the transition we made in 2006 and are setting the stage for a very successful 2007,” added Oldham.

SureWest closed the sale of its directory-publishing subsidiary in February. Costs form the sale process and a pension plan freeze contributed to increased operating expenses in the quarter. However, the pension plan freeze could save $5 million per year, some of which the company will put into a new employee compensation plan.

Long distance lines increased by 10% over the prior year period and long distance penetration reached 46% at the end of 2006, which helped SureWest’s telecom segment posted operating EBITDA of $82.9 million for the year, over 4% higher than 2005.

The strongest segment for SureWest was easily in broadband, where subscribers passed 57,000 as of the end of the fourth quarter, a 4% increase for the quarter and an increase of almost 16% for the year. Broadband segment revenues for the fourth quarter ($15.7 million) represented a sequential increase of nearly 3% and an increase of 18% compared to the fourth quarter of 2005.

“Our broadband segment became a larger part of total revenue at 47% compared to 23% a year ago,” Oldham said.

Wireless revenue grew by 3% to $8.7 million as the company continued to move away from its pre-paid service, which now make up only about 3% of its wireless base. However, operating expenses for this segment, exclusive of depreciation and amortization, were 15% higher in the fourth quarter of 2006 than the fourth quarter of 2005, and 8% higher than the third quarter.