Rhythms reports 4Q and year-end losses

(Telephony) Rhythms NetConnections posted fourth quarter and year-end 2000 losses Thursday that the company said reflects costs related to its aggressive national network expansion and market condition shifts.

The DSL provider reported a fourth quarter net loss of $162.9 million, compared to $90.3 million for the same three-month period last year. The company’s basic and diluted loss per share for the fourth quarter was $2.25, compared to $1.23 for the same quarter in 1999.

EBITDA losses for the fourth quarter 2000 were $118.1 million, compared to $71.4 million in 1999.

Revenues after SAB 101 for the fourth quarter were $17.2 million, compared to $5.5 million for the same quarter in 1999. Losses from operations in the fourth quarter 2000 were $146.2 million compared to $80.7 million for the fourth quarter 1999.

For the year, revenues jumped from $11.1 million in 1999 to $46.1 million in 2000. Operating losses also increased significantly from $189.2 million in 1999 and $504.4 million last year.

Rhythms’ Chairwoman and CEO Catherine Hapka said that the markets’ priority shift from line growth at any cost to profitability contributed to the company’s losses. She said that Rhythms’ refocused business model for 2001, which includes concentrating efforts on its 40 largest markets and adding customers to its completed U.S. network, would satisfy new market demands.

As a result, Rhythms said it would take a one-time first quarter 2001 restructuring cost of $15 million to $17 million.

Hapka also said that the FCC’s recent line sharing ruling would help restore the company.

“Because we built our network right the first time, we’re prepared to take full advantage of true line sharing in 2001,” Hapka said. “With our focused business model, we will generate sufficient savings to extend our cash position into the 2002 first quarter.”

But analysts said that overhauling the business model would do little to stir investors’ interest or confidence in the company.

“This company started scaling its business way too late in the game and they’ve got a lot of high-yield debt,” said Dan Ross, an analyst at Sanders Morris Harris. “Now they’re finally starting to scale their network and they had really good growth of customers this quarter, but at the end of the day it’s too little, too late.”

EBITDA losses for 2001 are expected to be $395 million, which includes $100 million in operating lease expenses.