CNSL

Consolidated Communications Holdings, Inc. (CNSL)

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Industry: Public Utilities
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Consolidated Communications Holdings, Inc. (CNSL)

Q2 2010 Earnings Call

August 05, 2010 11:00 a.m. ET

Executives

Noel Ryan - Director, IR

Mark Cox - EVP & CFO

Uzi Yemin - President & CEO

Fred Green - President & COO

Executives

Matt Smith - Director, IR

Bob Currey - President & CEO

Steve Childers - CFO

Analysts

Gray Powell - Wells Fargo Securities

Frank Louthan - Raymond James

Dave Coleman - RBC Capital Markets

Barry Sine - CapStone Investments

Donna Jaegers - D.A. Davidson

Operator

Good day ladies and gentlemen and welcome to the Consolidated Communications Holdings Inc, Second Quarter 2010 results Conference Call, (Operator Instructions). As a reminder this conference call is being recorded.

I would now like to introduce your host for today's conference Matt Smith, Treasurer and Director of Investor Relations, sir you may begin.

Matt Smith

Thank you Devin and good morning everyone, welcome to our second quarter 2010 earnings call to review the company's results that were released this morning. Joining me on the call today are Bob Currey, President, Chief Executive Officer and Steve Childers, Chief Financial Officer.

After the prepared remarks we'll conduct a question and answer session. I will now review the safe harbor provisions of the call and hen turn it over to Bob. This call may contain forward-looking statements within the meaning of the Federal Securities laws. Such forward-looking statements reflect among other things management's current expectations, plans and strategies and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements. Please see our public filings with the Securities and Exchange Commission for more information about forward-looking statements and related risk factors.

In addition, during this call, we will discuss certain non-GAAP financial measures. Our earnings release for this quarter's results, which has been posted to the Investor Relations section of our website, contains reconciliations of these measures to their nearest GAAP equivalent.

I will now turn the call over to Bob, who will provide an overview of our financial and operating results. Steve Childers will then provide a more detailed review of the financials, Bob.

Bob Currey

Thanks, Matt and good morning everyone. We appreciate you joining us today as we review our results for the quarter. As is our normal practice, I will start with a high level financial and operating high lights and then Steve will provide a detailed review of the financials.

Second quarter of 2010 was another solid quarter for us revenue was 95.7 million and adjusted EBITDA 46 million. As we mentioned last quarter, the sale of our telemarketing business and the ongoing process to close our operator services unit will lower revenue, but be neutral to EBIDTA, when excluding the 1.8 million of the revenue reduction attributable to these businesses our overall revenue declined by less than 1% on a sequential basis.

With respect to our dividend, we continue to deliver a solid and secure return to our share holders as demonstrated by our pay out ratio, 70.6 for this quarter and 67.2% year-to-date.

Operationally, we continue to perform well despite the competitive and economic pressures, we increased our total connections for the third consecutive quarter and delivered growth of 4,150 connections year-over-year. This growth is lead by our broadband products, which fortify our competitive position in all three states.

We increased our broadband connections by 2,500 in the quarter, in what has historically been our softest quarter. This brings our total broadband customers to a 130,000 which represents a year-over-year increase of 12%. Our industry leading DSL penetration which is currently at 43% provide peer pricing points at various speeds as high as 20 megabits.

We have been successful in adding our IPTV service to our DSL customer base and the combination of our larger DSL penetration with our bundle pricing advantage provides us with substantial growth opportunities.

Currently, we penetrate 13% of the 198,000 homes that we pass with our IPTV service. We're driving higher ARPU through modest price increases and more importantly, through up selling HD and DVR as well as more video on demand programming. We see upside in this ARPU drivers as well.

With respect to access lines, we had another strong quarter. Our ILEC lines decreased by 2,400 or 1%. This brought our line loss rate for the last 12 months down to 4.8% compared to the 8% rate at this time last year. And this is the lowest rate we've had since the end of 2007 before our North Pittsburgh acquisition and positions us as one of the best in the industry. We feel this is the direct result of our success in providing attractive product bundles coupled with exceptional service.

Specific to the Pennsylvania CLEC business, this is the third quarter in a row that we have increased access line equivalents. And the key driver of this success is tied to our commercial, Metro-Ethernet data product, which can be either fiber or copper base.

The copper-based product was another positive that came out of our North Pittsburgh acquisition and we have been able to replicate it in our Illinois and Texas markets. We have increased the number of Metro E-circuits by 25% over the last year.

From a competitive standpoint, pricing continues to be rational with a variety of aggressive promotional offering, leading the acquisition battle. We're delivering the best products and services at a competitive price and continue to remain flexible with our marketing and promotional plans.

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