Larrisa Herda

Companies naturally become more conservative in times of economic upheaval. For a company that has been playing it cool all along, though, times like this give it a chance to shine.

That's the situation for Time Warner Telecom, which is consistently named by analysts as one of the few thriving CLECs. Time Warner Telecom has achieved that status by being focused, not flashy.

The Littleton, Colo.-based carrier specializes in offering voice and data services to medium-sized and large enterprises in mostly top-tier markets. For fiscal year 2000, the company posted one cent earnings per share on $487.3 million in revenue. The company's business plan, which is fully funded, has it operating in 44 markets by year-end.

“We have always built this company with the long term in mind,” says Larrisa Herda, Time Warner Telecom's president and CEO. “While many others in the industry believed that top-line revenue growth was the end all, we believed that making money was the endgame. We have always focused on the fundamentals of business: building out assets, driving revenues that have margin and providing high-quality products and service to our customers.”

The company has been conservative throughout its history, say analysts, promising only what it knew it could deliver and rejecting hotter business plans such as DSL, which a few years ago some encouraged the company to offer.

“They are one of the clear survivors here,” says Daniel Zito, senior vice president of Lehman Bros. “If you look at Time Warner Telecom in terms of the focus of their business, which has never strayed, it speaks very well for high growth.”

Though the company has been run well, the same analysts attribute some of Time Warner Telecom's success to fortunate circumstances. Being able to brand itself as a Time Warner company has given it a level of credibility most CLECs do not enjoy, says Kenneth Kotylo, telecom services analyst for William Blair & Co. In addition, Time Warner Telecom has been able to piggyback on rights of way owned by Time Warner Cable, allowing the company to save on the construction of its network.

Nevertheless, the even-keeled approach of the company means it has not been required to make adjustments to its business plan during the slowdown, says Herda.

“We have not changed the way we do business today at all. This is actually an opportunity for us to accelerate our plans because we're one of the few companies that can actually fund the building out of networks,” she says.

Cash on hand is in fact a strong point for Time Warner Telecom. At the end of the first quarter, the company had more than $549.8 million in cash and marketable debt securities. Much of that comes from a joint debt and equity offering it made earlier in the year that raised more than $956 million. In March the company reaffirmed earlier statements that it has budgeted $600 million for capital expenditures in 2001.

Some of that money was raised to fund its acquisition of the assets of bankrupt CLEC GST Telecommunications in January. When the GST integration is completed, it will bring Time Warner Telecom into 15 new markets in the western U.S.

Though he believes the GST acquisition is a good one for Time Warner Telecom, Kotylo thinks it also poses the biggest operational risk. “Stay conservative, get that thing integrated,” he says. “Integrating the networks, integrating people, integrating the back office is easier said than done.”