Fairpoint reports progress

Fairpoint Communications (NYSE: FRP) reported continued progress in restoring normal operations following the company’s February cutover of the former Verizon network in three states to its own back-office systems.

In early March, the company identified two key problems it continued to struggle with a month after its massive systems cutover from Verizon: order flow and billing. However, those two problems created a third problem – that of high volumes of calls into customer support centers, which left many consumers unable to get through. And last month auditors suggested that the problems may run deeper than Fairpoint has acknowledged.

However, on the company’s first-quarter earnings call today, Fairpoint reported progress on both issues, which in turn helped ease call center activity.

All billing cycles have been processed on schedule since early March, and 96% to 97% of all bills are now accurate, Fairpoint said, as customers receive their third bills since the big cutover. Those improvements have helped reduce the volume of calls into the company’s call centers.

Weekly calls into Fairpoint’s consumer call centers, which ballooned to more than 85,000 in early March when monthly bills were sent out, have averaged 37,000 in each of the past three weeks, Fairpoint said. That compares to 35,000 per week before the cutover.

“Call volumes in our customer-service centers have declined significantly over the past month and are now very close to pre-cutover levels,” said Gene Johnson, Fairpoint’s chief executive officer, later adding, “The volume of [consumer complaint] calls coming to my home has decreased dramatically.”

The company is still working through a backlog of unfulfilled orders, which today stand at between 10,000 and 13,000 and will probably remain until near the end of the second quarter, when a general return to normal operations is projected, Fairpoint said today. In the meantime, the company is resubmitting the oldest orders into the system to help speed up the process and has hired additional staff on a temporary basis to help make installations.

Since the February 9 cutover, Fairpoint has received nearly 200,000 orders and completed about 175,000, or 85%, of them. Of the remaining 25,000 unfulfilled orders, 10,000 to 13,000 are considered late, the company said. And about a third of those late orders are less than 10 days late. “Under normal business operations, we’d expect to have 12,000 to 15,000 orders in the system at any point in time,” said Peter Nixon, Fairpoint’s president.

In the first 10 weeks following the February cutover, Fairpoint averaged 18 days for installation of completed orders. In the month that followed, however, that number dropped to seven days.

Fairpoint is also upping field dispatches to nearly 600 per day in the past week from a pre-cutover level of between 400 and 500 per day. One day last week, the number neared 700, Fairpoint said.

As a result of its post-cutover problems, Fairpoint is delaying by at least 90 days the expected completion of its core network buildout, which the company originally said would be finished by the middle of this year.

“We believe it’s prudent to take the extra time to ensure operations are back to a normal level of activity for several months before we begin to roll out a new suite of services and stretch operations any more,” Johnson said. “While we recognize this delay will reduce our opportunity for revenue growth in the second half of the year, we want to be absolutely certain we can support the new services before we ramp up marketing and sales efforts.”

Another effect of the cutover problems has been a delay in marketing promotions, which Fairpoint plans to correct soon, with aggressive promotions sometime this quarter. That’s particularly important as cable competitors in Fairpoint’s footprint have been capitalizing on the company’s much-publicized service problems to lure customers.

However, business customers – a crucial element of Fairpoint’s plan to acquire Verizon’s assets -- have been surprisingly loyal so far, Fairpoint said. As total access lines in the Northern New England territory declined 1.8% on an adjusted basis in the first quarter, business access lines remained flat.

“Business customers recognize how complex this [cutover process] is,” Johnson said. “They’ve been amazingly forgiving and supportive.”