Oct 16, 2001 12:00 PM

Broadwing expects tough fourth quarter

Broadwing reported a respectable third quarter but hinted of harder times to come. Compared to last year’s third quarter, Broadwing overall revenue increased 13% to $598 million, and EBITDA grew 21% to $166 million. The company reported a net loss of $30.5 million, or 14¢ per share, two pennies worse than a year ago and one penny better than analysts’ estimates.

More on this Topic

Industry News

Blogs

Briefing Room

Sales growth was led by Broadwing’s wireless division, which saw revenue increase 32%. The company’s local exchange company, Cincinnati Bell Telephone, grew revenues 5%, and revenue at the company’s national broadband services business grew 15%--a “significant deterioration” from the second quarter’s 39% growth, said Rick Ellenberger, Broadwing’s president and CEO.

Evidence of the erosion of demand for broadband was seen in late purchasing activity by carrier customers and a departure of new customers caused by financial difficulty, said Ellenberger. Also cutting into revenues was the migration of Level 3 traffic off of Broadwing’s network during the quarter. While the move was expected, it caused “a loss of high-margin revenue” that is more difficult to replace in a market of reduced demand, Ellenberger said.

“The economy continued to worsen as we exited the quarter. We recognized softening across our business, particularly pronounced in our broadband business,” Ellenberger said. “The fourth quarter will be our most challenging quarter ever.”

Broadwing revised its yearlong guidance downward, lowering its 2001 revenue projection to between $2.35 billion and $2.38 billion from $2.5 billion and its EBITDA target to between $620 million and $630 million. The company also reduced its 2001 capital expenditure budget by $30 million to $670 million, a 21% decrease from last year.

Ellenberger said the company has begun a review of ways to reduce expenses and capital to protect and increase EBITDA and cash flow. Actions could include combining staff functions, reducing headcount, and exiting non-performing services. Such activities may produce a charge in the fourth quarter, Ellenberger said.

--Vincent Ryan, senior editor