Doug on IP Comm – An independent voice on VoIP, telecom, and IP Communication

Posts Tagged ‘Doug Mohney

I am in the process of “transferring the flag” from wordpress.com to my own site at http://dougonipcomm.com.   As much as I like the ease of use for WordPress.com blog hosting,  I can do more in terms of customization and monetization if I’m on a stand-alone site.

If you are a frequent visitor, redo your bookmark now. At somepoint i”m going to take everything down from this location except a pointer to the new site.

Right now I’ve got 14 (fourteen) meetings plus two panels penciled in at IT EXPO West in Los Angeles, spread across Tuesday,  September 1 and Wednesday, September 2.

Tuesday, I’m moderating an IP Peering Panel from 3:45-4:30 PM and Wednesday I put on my HD hat to do “HD Voice Deployments” from 1:15-2 PM.

If you are floating around downtown LA (and the Westin conference hotel) on Monday, August 31, I should have time available to meet and greet from around lunchtime to about 5 PM or so, so drop me a direct email at moo@vegascommando.com if you want to catch me before the real fun starts.

You almost get the impression that Qwest has a death wish.  It wants to sell off a business it is making money with — its long-haul network — while continuing to hold onto all of its (steadily declining) landline business.  What is wrong with this picture?

Since everyone knows Qwest is a wounded duck with its heavy debt load and that there aren’t that many quality buyers for long-haul these days , bidders are offering as little as under $1 billion — Wayyyy lower than the $3 billion Qwest sought for the network.

Qwest is managing to generate profits by cost cutting, so what’s the rush to sell? As Cartman would say “This. Does Not. Make Sense.”

The company needs to borrow a page from Verizon and start selling off some of its landline assets to other carriers, shedding some of its declining parts of its business. To be fair, the financial instrument that Qwest really wants — cold hard cash — may not be as readily available to potential buyers, so some creative deal-making might be necessary.

For example, Qwest could engineer a three-way deal to shed some of its rural territories with Verizon — someone who has cash — and a smaller carrier, such as Frontier, WindStream, or CenturyLink (formerly CenturyTel).  This complicated trade would include something less valuable (rural area landlines/territories), more valuable (a territory Verizon really would like to have, say Colorado or Washington), and cash provided by Verizon.

When the smoke cleared, the rural carrier would have more rural lines (check), Qwest would have cash (check), and Verizon would add on a new major city or two to its portfolio (check).

Would Verizon be party to such a transaction? Certainly it has both cash and cash flow to invest. It isn’t shy about buying to expand market share (Alltel) and it has shed its unattractive wireline holdings to other buyers.

One might argue that simply purchasing Qwest outright would be the best move, but I think its unlikely because of its big debt load and the regulatory headaches a full blown purchase would entail.  A smaller deal would allow Qwest to pay down its debt and Verizon to expand with a minimum of regulatory headaches.

Tweaking various parts of its operations and doing a little bookkeeping shuffle, Vonage reported EBIDTA of $21 million for the first quarter of 2009 and GAAP net income of $5 million; about $0.03 per share. However, the company is still spending $290 per customer to get customers in the door and had a net loss of 6,000 lines in the quarter.

On the plus side of the ledger, Vonage is touting the second quarter of positive income from operations and the sixth consecutive quarter of growth in adjusted EBIDTA. Net income includes a $13 million adjustment in the company’s convertible debit; if you throw that out, the net loss translates to $8 million or $0.05 per share.

Also good: telephony services ARPU was at $28.78, up from $28.28 last quarter. ARPU was up in a combination of promotions mix, tighter controls on customer credits, and a bookkeeping change due to a decrease in the FCC USF rate.

Improving, but needing lots of work, the marketing cost per gross subscriber line addition (SLAC) was $290, down from $309 last quarter — still in the high-blood pressure zone. Churn creeped back up to 3.1 percent from 2.9 percent last quarter and is blamed in part on seasonality.

Vonage also lost more than 6,000 net subscriber lines, finishing the quarter with 2.53 million lines in service. Last quarter they lost 14,744 lines. A year ago, they had added over 30,133 for the quarter and had a total of 2.61 million lines.

Things you might want to know for Thursday, May 7–

  • Cox comes over with a DOCSIS 3.0 cable modem for trial.
  • Vonage has their Q1 earnings report out (Good look with that…)
  • Yesterday, AudioCodes reported its quarterly earnings; they lost money in the Q1 due to Nortel disintegrating, but no big surprise there.