Time Warner CLEC Has Big Plans
Time Warner Telecom Inc., media giant Time Warner
Inc.'s competitive-local-exchange-carrier unit, unveiled an aggressive expansion plan
last week to add eight to 12 new markets during the next two years.
The plan marks a substantial increase over the
company's previous rollout plans, fueled by a flood of new capital and increasing
customer demand for service.
"The expansion of our network is the result of
incredible customer demand for local bandwidth," Time Warner Telecom CEO Larissa
Herda said in a prepared statement. "Our local and regional fiber networks allow us
to offer customers any type of technology, product or solution in a fast, efficient and
highly reliable manner."
The first phase of the expansion will be funded through a
$400 million credit facility arranged by Chase Securities Inc.
Time Warner Telecom currently offers service in 21 markets.
The company had earlier announced plans to expand into Los Angeles and Orange County,
Calif.; Fayetteville, N.C.; and Dayton, Ohio, by the middle of this year.
Time Warner Telecom did not reveal the specific markets it
will tackle, but it said they would be comparable to areas like Atlanta; Chicago;
Minneapolis; Syracuse, N.Y.; and Columbia, S.C.
Spokesman Bob Meldrum said the company originally planned
to expand into five additional markets in the next two years, but it changed that strategy
as a result of increased customer interest.
"There is incredible customer demand for local
bandwidth," Meldrum said. "With that demand, we wanted to expand into other
In some cases, Meldrum said, the company's current
subscribers urged Time Warner Telecom to expand into specific markets where those
customers had satellite offices.
Donaldson, Lufkin & Jenrette Inc. analyst W. Todd Scott
said the company is well positioned to take advantage of increased demand.
"They are one of the few that can satisfy that
[demand] on a local basis," Scott said. "It's just a high-quality team
providing a high-quality service."
Meldrum added that the new markets don't have to be
served by Time Warner Cable. The MSO currently has operations in 19 of the 21 markets
where Time Warner Telecom operates.
Time Warner Telecom, based in Littleton, Colo., focuses on
building local fiber networks to offer "last-mile" broadband data, Internet
access and voice for small, medium and large businesses.
The company reported $91.5 million in revenue in the fourth
quarter of 1999, up 128 percent from $40.1 million in the same period a year earlier. For
the year, total revenue was $268.8 million, up 121 percent.
The strong growth resulted from the company continuing to
capitalize on the high demand for bandwidth in all of its markets.
The company added 35,642 access lines during the quarter,
growing to a year-end total of 192,369. As of year-end, the company reported 5.3 million
voice-grade-equivalent circuits, up 933,500 in the quarter.
Fourth-quarter cash flow was $23 million, compared with a
cash loss of $2.8 million in the comparable 1998 period. For the year, cash flow was $37.8
million, versus a cash loss of $22.7 million in 1998.
The CLEC unit went public in May at $14 per share, raising
$289.8 million to pay debt and to fund expansion. Last Tuesday, its closing price was
$62.13. After the company's earnings report Feb. 9, its stock price shot up nearly 30
percent to $80.31 in morning trading.
Scott credited its strong results and expansion plans.
"They are essentially accelerating their business plan by 50 percent, and our
[cash-flow] projections for the year are going up a little bit," he said. "There
are no companies out there that can say that."
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