Intermedia’s net loss grows

(Telephony) WorldCom acquisition target Intermedia Communications posted a relatively large fourth quarter loss today as revenues in local access and voice services fell 27% and costs for network buildouts and employee retention ate into the bottom line.

The competitive carrier recorded a net loss of $205.6 million, or $4.34 a share, on quarterly revenue of $275.6 million. On average, analysts surveyed by First Call/Thomson Financial had been expecting a loss of $4.05 share. The loss was an increase from the year-ago loss of $185.2 million, or $4.05 a share, on revenue of $248.8 million.

Intermedia’s EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was a negative $26.9 million.

“[The] EBITDA loss for the quarter was wider than estimated due to both strong growth in low margin revenues and higher than expected SG&A spending related to employee retention efforts,” said a report by Mark Kastan, analyst at Credit Suisse First Boston. “During the quarter, [Intermedia] lost 13%, or 100, of its salespeople. Although [Intermedia] spent aggressively on employee retention initiatives during the quarter, the churn in the sales force was high due to the pending merger with WorldCom,” Kastan said.

Intermedia’s Data, Internet and Web hosting revenue increased by 50% in the quarter, to $156.9 million. Digex, the Web hosting unit coveted by WorldCom, grew revenues 167% to $57.9 million. Digex recorded one-time fees in the amount of $6 million associated with the ramp-up of the WorldCom alliance, Kastan said.

Local access and voice revenues fell to $78.1 million, down from $107 million in the year ago quarter. Intermedia attributed the drop to declining long distance prices and lower reciprocal compensation revenue. Net local access line additions were below analysts’ forecasts due to the more than 34,000 lines disconnected as a result of the demise of two large ISP customers: ICG Communications and Ziplink.

Intermedia reported capital expenditures for the quarter of $130 million. The company ended the year with $114.7 million in cash and cash equivalents and about $2.4 billion in debt. Kastan said the company is funded through the current quarter.