Expansion cuts into Hawaiian Telcom’s earnings

Costs associated with the expansion of Hawaiian Telcom’s broadband network weighed on third-quarter earnings even as the company reported solid gains in its television and high-speed Internet services.

The state’s largest phone company reported Thursday that it had net income of $5.6 million, or 52 cents a share, in the July-to-September quarter, down 24 percent from $7.4 million, or 68 cents a share, in the same period a year earlier. Company officials attributed the decline primarily to a $1 million increase in depreciation and amortization related to investments made in its broadband network, which involves laying of fiber-optic cables.

The earnings beat analysts’ expectations. A consensus forecast compiled by Bloomberg News was for earnings per share of 44 cents in the third quarter.

Revenue totaled $96.6 million in the third quarter, little changed from $97.0 million a year earlier. Revenue growth in video, high-speed Internet and equipment sales was offset by a 5.6 percent decline in access lines, also known as land lines, the company reported.

Revenue from the company’s video service, which launched in July 2011, rose to $1.53 million in the third quarter from $1.04 million in the second quarter. There were 8,444 subscribers of the video service as of Sept. 30, up from 6,354 three months earlier. Hawaiian Telcom has been installing more fiber-optic lines on Oahu to provide bandwidth needed to deliver the video service to customers’ homes. By the end of the third quarter, Hawaiian Telcom had "enabled" 59,400 Oahu households to receive service. That was up from 50,100 households at the end of the second quarter.

Hawaiian Telcom’s high-speed Internet service generated $9 million in third-quarter revenue, up from $8.9 million a year earlier.

"Our quarterly results continue to show positive momentum in our key next-generation services," said Eric Yeaman, Hawaiian Telcom’s president and chief executive officer. "The success of Hawaiian Telcom TV continues to be a strong catalyst driving our second consecutive quarter of sequential growth in consumer revenues," Yeaman said in a prepared statement.

In a conference call with telecom analysts that followed the release of the earnings report, Yeaman gave an update on a labor dispute between the company and its unionized workers. The workers, members of International Brotherhood of Electrical Workers Local 1357, have been working without a contract since the start of the year. The company unilaterally imposed its final offer after the two sides reached an impasse in contract talks late last year.

Yeaman said he met recently with Scot Long, the union’s business manager.

"I would tell you that we continue to have discussions in hopes that we can try to reach an agreement. And at this point I can’t predict whether we will and, if we do, when," Yeaman said. "But I can say that at least we’re having some good, productive discussions."

Yeaman also said he expects the company in the fourth quarter to complete acquisition of Wavecom, a Hono­lulu-based information technology company which owns a fiber-optic network connecting the main Hawaiian Islands.

"We’re still going through the regulatory approval process at this time and have responded timely to all questions and requests for information by state and federal agencies," he said.

Hawaiian Telcom’s shares rose 5 cents, or 1.2 percent, to close at $16.55 on the Nasdaq Global Market.

The company reported earnings before the market opened.