TW Telecom continues enterprise gains

Strong sales of data and Internet services to enterprise customers helped Time Warner Telecom overcome weakness in its biggest business, dedicated transport, and narrow its first-quarter loss.

The competitive carrier reported a more than $22 million net loss in the first quarter (down nearly 37% from a year earlier) while revenue increased 9% from a year earlier to $186 million.

Revenue from network services (formerly labeled "dedicated transport") grew 1% sequentially to $86.3 million, while that from voice services sank 1% sequentially to less than $43 million. But revenue from data and Internet services grew 8% sequentially to more than $48 million.

Enterprises now contribute 58% of the company's revenue, while carriers contribute 35% (or 40%, including intercarrier compensation). Time Warner Telecom's first-quarter revenue from enterprises was up 17% from a year earlier, representing 90% of the carrier's data, Internet and voice revenue.

CEO Larissa Herda said the company is slowly but surely adding more large enterprise customers and building the level of sales within those accounts. She predicted that trend to continue as Bell companies merge, citing increasing demand for network diversity and relaying the recent report from a large enterprise client of a drop-off in responsiveness from merging megacarriers.

Having grown its sales force from 318 to 330 in the first quarter, Time Warner Telecom expects to continue adding staff this year but will do so very selectively, hoping to add sales personnel from merging carriers who can bring customers with them. "The direct sales machine is not just a numbers game," Herda said. "It's much more complex. We're very strategic and selective in how we add sales people, knowing it will take them a while to build sales."

Though revenue from carriers was up 2% sequentially in the first quarter, Time Warner Telecom warned of anticipated disconnects from carrier customers in the near future as a result of carrier consolidation. However, Herda downplayed their potential effect.

"I guess if they all happened at once, you could see some carrier [revenue] decline," Herda said. "But it's not going to have a huge impact on our business."

During the company's earnings conference call this morning, Herda also seemed to take a few shots at some of her rivals in the competitive carrier space. Near the top of the call, she pointed out that Time Warner Telecom's "modified" earnings before interest, taxes, depreciation and amortization (EBITDA) has been positive since 1999, perhaps a response to Broadwing touting its newly positive adjusted EBITDA yesterday. And when asked about Level 3 Communications' recent acquisitions of TelCove and ICG Communications, Herda said, "The market is starting to recognize the strategic value of local assets. We've always believed in them. It looks like others are starting to find religion, too."