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July 31, 2009
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Regional telecom operator Centennial Communications (CYCL) reported fiscal fourth-quarter earnings per share of $0.33 yesterday, outpacing the Zacks Consensus Estimate of $0.14.
Revenues for the fourth quarter were $268.1 million, up 1% year over year, which was short of the Zacks Consensus Estimate of $272 million. Net income for the quarter came in at $37.1 million, compared to a net income of $12.9 million in the corresponding quarter of fiscal 2008.
Revenues for the full-year of fiscal 2009 (ended May 31, 2009) exceeded the Zacks Consensus Estimate reaching $1.1 billion, up 5% year over year. Net income for the year was $67.1 million or $0.60 per share versus $25.1 million or $0.22 per share reported in fiscal 2008, beating the Zacks Consensus Estimate.
At the end of fiscal 2009, Centennial had 1,078,200 total mobile subscribers (overall retail penetration of 8.3%), down from 1,092,600 and 1,094,900 in the year-ago quarter and the previous quarter, respectively. Total access lines and equivalents were 694,900, up from 582,200 registered at the end of fiscal 2008.
Centennial’s US wireless business posted fourth quarter revenues of $144.1 million, up 1% from last year’s comparable period. Roaming revenues increased 16% from the year-ago quarter primarily due to consistent growth in data roaming revenue and was partially offset by declining voice roaming revenue. Retail revenue remained stable on a year over year basis.
ARPU for the quarter was $73, down sequentially while increasing 1% over the year-ago quarter. Postpaid churn of 2.1% (stable sequentially) reflects an increase from 1.8% a year ago while.
At the end of the quarter, U.S wireless operations had 652,000 total subscribers reflecting a decline from 664,200 and 665,300 subscribers reported in the previous and year-ago quarters, respectively. This decline is largely attributable to 11,300 subscriber lost in the postpaid segment.
The wireless business in Puerto Rico generated revenues of $84.5 million, up 1% from the adjusted year-ago quarter. Revenue growth was impacted by a persistent decline in legacy voice revenue, partially offset by growth in instant Internet broadband data revenue. Puerto Rican wireless business ended the fourth quarter with a total subscriber base of 426,200, representing a decline from 430,700 in the last quarter and 427,300 in the prior-year quarter. This is primarily due to increase in postpaid churn.
Puerto Rico’s broadband operation posted revenues of $36.3 million in the quarter, up 1% year over year. Switched access lines increased by 9,000 lines to 104,200, up 9% from the year-ago quarter. Additionally, dedicated access line equivalents grew by 11,100 lines sequentially to 590,700 lines.
Centennial is set to be acquired by AT&T Inc. (T) in the third quarter of calendar year 2009 for approximately $2.8 billion in cash and net debt. As per the deal terms, shareholders of Centennial will receive $8.50 in cash for every share they own for a total price of $944 million. The transaction, if successfully completed, will allow the company’s wireless customers access to AT&T’s high-speed network.
The company is currently in the process of upgrading its U.S. wireless network to the next generation 3G technology. During fiscal 2009, Centennial has completed the roll out of 3G wireless network across its markets in Puerto Rico. Additional initiatives include the launch of a new handset program (called ‘New When You Want It’) in the U.S. and Puerto Rico, which allows the customers to upgrade their handsets at any point in time.
We remain concerned with the competitive factors in Centennial’s coverage markets that may continue to challenge customer retention and pricing structure as the tier-1 carriers capture additional market share. Moreover, the company’s highly leveraged balance sheet (net debt of $1.8 billion) also remains an issue to consider. That said, we maintain our Hold recommendation for Centennial.
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