Aug 8, 2006 2:43 PM,

SureWest continues operational revamp in Q2

By Tim McElligott

With two quarters under his belt as CEO, SureWest's Steve Oldham is looking to the future and a long-term payoff to his cost-cutting initiatives and operational changes. The independent telecommunications holding company from northern California reported its second quarter earnings today highlighted by a 24% increase in broadband revenues and 4% increase in the telecom segment's net income despite a 5% drop in revenue from last year.

"Over my first six months as CEO with SureWest I have become first and foremost increasingly excited about the company's future prospects and the opportunities available to us," Oldham said.

Consolidated operating EBITDA was up 5% at $19.2 million, thanks in part to an 18% increase in the number of broadband subscribers and a 28% drop in consolidated capital expenditures, offset somewhat by a 2% drop in wireless revenue.

Oldham said the steady growth of the broadband segment demonstrates the success of the company's business plan.

Broadband growth was clearly the best news in the quarter as subscribers grew to about 52,000, up 18% over last year. That growth came at a cost, however, as operating expenses in the broadband segment increased 13% due in large part to an increase in costs associated with acquiring and adding subscribers. The segment had a net loss of $4.8 due to higher depreciation expenses resulting from the continued buildout of the segment's fiber-to-the-home network.

"[We] have spent considerable time reviewing operations and business practices in order to identify opportunities for improvement. In the second quarter changes were implemented to take advantage of some of the opportunities identified," Oldham said.

The company has realigned its sales organization and continues to focus on the productivity of its employees and its potential for automating processes. SureWest has reduced staffing by 1.4 % since the first of the year and more than 21% since January 2005. "There will likely be further reductions as a result of normal attrition and job consolidation," Oldham said.

SureWest increased the number of marketable homes on its fiber-to-the-home network by 15% over last year at this time and made headway on reducing churn in its troubled wireless business by introducing a new travel plans package that addresses issues customers were experiencing roaming on the fringes of its network. The wireless segment lost $2.4 million in the quarter, an increase of 6% over the second quarter of 2005.