PacWest sees VoIP plan bloom

Pac-West Telecom officials say that company is making a successful transition to being a wholesale provider of both traditional voice and Voice over IP services. And while the Western carrier posted a loss of $2.3 million and saw revenues decline, President and CEO Hank Carabelli said the business plan is on track.

The company reported a decrease in revenues by 22% over the first quarter of 2005 and 21% from the second quarter of 2004, but that decline reflected the company’s sale of its small to mid-sized enterprise business to TelePacific at the end of the first quarter of 2005. PacWest was able to trim its net losses from $9.1 million in the second quarter of 2004 to $2.3 million, in part because of a much-improved balance sheet.

“Our first pure quarter with our new business model is proceeding very well and is on track,” Carabelli said. “Minutes of use continue at record levels – we were at 12.2 billion during second quarter. We are doing well, not only from a financial standpoint, but from what we see in the market.”

According to Carabelli, PacWest is seeing a boom in interest in its services, which enable other service providers to compete in the voice services market.

“We have had some important contract renewals on the ISP side, and one of our major ISP customers lead us to expand our sevrvice into Utah,” he said. “What has been especially encouraging has been that a number of new customer categories are attracted to our VoiceSource product – 90% of new customer contracts have been to enhanced service providers – unified messaging, etc., and not just traditional ISPs.”

PacWest was able to use the funds from the $24 million sale of its enterprise business to retire $40 million in senior secure debt and eliminate warrants.

“We have less debt, less interest expense, lower ongoing depreciation, and no looming overhang on our equity and a simplified business model focused on service provider customers,” said Ravi Brar, chief financial officer. “The company is in no way as leveraged as it used to be.” Carabelli and Brar said they are not concerned that PacWest’s stock price continues to hover near the $1 mark on the NASDAQ where companies run a de-listing risk. “We will stay focused on our business plan and the stock price will take care of itself,” said Brar.

Pac-West's total revenues for the second quarter of 2005 decreased 22.1% to $21.9 million from $28.1 million in the first quarter of 2005 and decreased 21.2% from $27.8 million in the second quarter of 2004 primarily due to the sale of the enterprise customer base in the first quarter of 2005. The decline from second quarter 2004 was partially offset by an increase in minutes of use on PacWest’s network.

Carabelli sees brighter days ahead within the entire VoIP community, he said.

“The growth and acceptance of existing providers – CallWave Vonage Skype – and the fact that formerly free services are now transitioning to paid services is a positive sign,” he said. “There is a recognition in the industry, beginning with regulators and the developers of applications and including large new entrants such as Yahoo with its purchase of DialPad that IP is the space of the future. We enable all kinds of service providers to be custom voice providers.”