Fairpoint Communications Bright Future

This economy has been rough for some telecom and cable carriers.  There is also intense competition from within the industry, leading to even more intense pressure upon the various vendors to provide the best levels of customer service as possible.

One telecom, which is going through a rough period right now is, that of Fairpoint Communications.  Their most recent setback was a crippling union based strike which greatly afflicted their business operations.  During their Q1 earnings call to shareholders, the company surprisingly announced that they plan to engage in some type of merger and acquisition (M & A) activity with either another telecom or cable carrier.

The CEO, Paul Sunu, did not reveal any of the specifics of future M & A activity during the conference call but did mention that the main goal would be to, primarily, increase shareholder value of the company.

But, despite the huge obstacles it has seen lately, the CEO still sees some bright spots.  One of these is in the Ethernet Service sales.  This bundled package made up almost 11% of Fairpoint’s total revenue base, which also increased by 8.6% year over year (YOY).

The main clientele for its Ethernet based services includes regional banks, healthcare networks, and even wireless carriers.  But, despite these great revenue and growth rates, the company faces enormous competition from Comcast now that it has made its Ethernet services available to markets in New Hampshire and Vermont.

Revenue for Fairpoint Communications declined by $4.2 million.  This was mostly due to the strike of nearly 1,700 workers in the New England states.  However, after an intense period of negotiations, the workforce is now fully back in place, and support issues have been at its lowest levels since 2008.

According to the CEO:  “. . . the impact of a work stoppage, inclement weather and our decision to go dark with marketing in anticipation of and during the strike affected our results . . . we [have] made significant progress on our workload and the trouble load came down to pre-strike levels, overcoming the unprecedented succession of winter storms in New England.”  (SOURCE:  https://www.fiercetelecom.com/telecom/fairpoint-will-consider-m-a-opportunities-ceo-says).

For the rest of the year, it is expected that Fairpoint Communications will generate about $125 million in free cash flow.

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