TORONTO – Call-Net Enterprises Inc., otherwise known as Sprint Canada, reported revenue and EBITDA increases during the first quarter, ended March 31, 2005.
Revenue same in at $216 million, a 7% increase over Q1 2004 and EBITDA of $36 million was a 35% increase over Q1 2004. However, Call-Net recorded a net loss in the quarter of $13 million, compared with a net loss of almost $30 million in the first quarter of 2004.
“We delivered very positive results during the first quarter, both as a results of the Bell/360 acquisition and reductions in carrier costs driven by regulatory changes," said Bill Linton, president and CEO. "Our consumer division reported five per cent revenue growth and our business division grew by 23%. Local service, data and wireless now provide 56% of our total revenue and our cost of acquisition continues to improve quarter over quarter."
The company continued to experience growth in its local service offer, adding over 30,000 new local service and business line equivalents during the first quarter. The total number of local service consumer and business line count now stands at 495,100, including 336,100 home phone lines and 159,000 business local line equivalents. Overall churn for the quarter was 2.1%, down from 2.2% in the same quarter last year.
Consumer services revenue improved by 5% compared with the same quarter in 2004, as increases in home phone and wireless service revenue more than offset declines in dial-up Internet and long distance revenue. In the first quarter, 71% of consumer services revenue came from customers who purchased more than one product, compared to 56% in the first quarter of 2004.
Business Services revenue grew by 23% compared to the same quarter in 2004. Organic growth in local service and data and the full impact of the Bell/360 acquisition in late 2004, contributed to improvement in every product category except long distance.
As anticipated, gains in consumer and business operations were offset by a continued decline in wholesale revenue this quarter. Wholesale revenue in the quarter totaled $39 million, reflecting a 19% decrease from the same quarter last year. Revenue from wholesale comprises only 18% of consolidated revenue, of which 66% is long distance service.
Carrier costs were $97 million in the first quarter or 45% of revenue, up from $95 million in the same quarter last year. The increase is attributed to the addition of the Bell/360 base and costs associated with the increased volume of local, data and wireless services, offset by the effect of the CDN services decision (Telecom Decision CRTC 2005-6), which reduced access and other related services costs.
During the quarter, the CRTC issued three decisions that have a positive impact on the company. In February, the CRTC lowered the price of competitor digital network services (CDN services), which are facilities and services provided to competitive local exchange carriers (CLECs), reducing Call-Net’s carrier charges by approximately $25 million annually.
In March, the CRTC directed Bell Canada and Telus to grant CLECs direct access to their operational support systems (OSS). The ILECs have up to one year from the date of the decision to grant access, which will result in operational efficiencies and increased levels of customer satisfaction.
In April the CRTC issued decisions on quality of service, local promotions, the price floor regime and a public notice with respect to a proceeding to establish criteria for deregulating local services. Generally these decisions continue to support the development and evolution of a competitive telecommunications environment.
Yesterday, just before the announcement of the results, Call-Net announced the acquisition of certain Group Telecom network assets in New Brunswick and Nova Scotia from Bell Canada. The buy adds over 225,000 fibre kilometres to Call-Net, making it Eastern Canada’s largest CLEC.
The transaction is part of Call-Net’s acquisition of the 360networks Corporation (360/GT) customer base in Eastern Canada from Bell Canada, announced in November of 2004, which is mentioned above.
The agreement contemplates that Call-Net will purchase virtually all of the former Group Telecom’s network assets in New Brunswick and Nova Scotia including long-haul (inter-city) and access (intra-city) fibre, together with switching and network equipment from Bell Canada. Call-Net will take ownership of these assets at closing, which is expected to occur in the third quarter of 2005.
The purchase price for these assets will total $12.6 million and will be paid at closing. At that time, Call-Net’s agreement with Bell Canada to provide services and maintain the network in these provinces will be amended to reflect the change in ownership.
In addition, at closing, Call-Net will acquire from Bell Canada an option to purchase over 90% of the remaining CLEC network of former Group Telecom in the provinces of Ontario, Quebec, and Newfoundland and Labrador.
The maximum purchase price of these assets totals $22.4 million. Call-Net has paid Bell Canada $1.7 million on account of the option fee. The option grants Call-Net the exclusive right to take ownership of these assets by paying the balance of up to $20.7 million on the exercise of the option, currently expected to be at the end of 2006.
For the full releases, go to www.call-net.ca.
