Hawaiian Telcom top-tier internet subscribers grew 86% in first quarter

Hawaiian Telcom said that more of its broadband customers are opting for higher speeds available on its FTTH network, a trend that continued into the first quarter.  

Scott Barber, CEO of Hawaiian Telcom, told investors during its first-quarter earnings call that the service provider saw significant growth in the 100 Mbps to 1 Gbps range.  

“The number of internet subscribers on packages with 21 megabits and up grew 17% year-over-year,” Barber said during the earnings call, according to an earnings transcript. “But it was the number of customers with fiber-to-the-home speeds of 100 Mbps to 1 Gbps that grew the fastest, 86% year-over-year in the first quarter. Of our 203,000 fiber-enabled homes on Oahu, over 63% are fiber-to-the-home and can get these ultrafast speeds.”

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At the same time, Hawaiian Telcom is seeing value in using technologies such as bonding and vectoring to enhance speeds and availability for customers it can’t reach today with fiber.  

“Technologies such as bonding, vectoring, G.fast as well as Connect America Fund build-out and other initiatives in our planned capex program will help us support and expand our broadband capabilities in the area outside of our NGN footprint,” Barber said.

Barber added that “we believe that demand for higher speeds will continue to grow and our robust network, exceptional service and strategic support will ultimately be key differentiators.”

Dual, triple play bundles adoption continue

As it ramps up broadband availability, Hawaiian Telcom is finding that overall customer internet subscriber growth is being driven by service bundles that include higher speeds and video service.

The service provider continues to make progress with winning multi-dwelling unit (MDU) contracts to deliver its services to residents who live in apartments and condos.

In the first quarter, Hawaiian Telcom sold two additional single-play TV bulk MDU contracts totaling 130 units, and successfully renewed and converted an existing single-play TV bulk into a double-play bulk with internet. The telco now has 73 TV bulk MDU buildings and almost 12,000 MDU units under contract, most of which have been installed, with the remaining 700 units expected to be installed by the end of the year.

“As of the end of March, 95% of all of our video subscribers had double or triple play bundles with internet,” Barber said. “In the first quarter, the number of Oahu internet subscribers attached to TV grew nearly 15% year-over-year and now represents 57% of total Oahu internet subscribers, up from 41% in the same period 2 years ago.”

Hawaiian Telcom is hardly alone. Its larger telco brother CenturyLink continued to see similar trends in its wireline territories.

However compelling the bundling trend is, the service provider’s consumer revenue dropped $1 million year-over-year due to a decline in total internet lines and lower year-over-year ARPU from promotional activities.

Legacy losses strain next-gen gains

The company is also facing challenges from consumers cutting landline voice in favor in wireless and migrating off of low-speed DSL services.

“Revenue growth from video and high-bandwidth fiber internet services was more than offset by the year-over-year revenue decline in consumer legacy voice and low bandwidth internet services,” said Dan Bessey, SVP and CFO. “The majority of our consumer legacy line loss continues to be attributable to VoIP competition and wireless substitution, which is an industry-wide trend.”

Hawaiian Telcom’s overall results were mixed as the service provider saw gains in next-gen services offset by ongoing legacy losses across its consumer, business and wholesale units.

Here’s a breakdown of Hawaiian Telcom’s key metrics:

Consumer: First-quarter consumer revenue totaled $34.3 million, compared to $36.2 million in the first quarter of 2016. Revenue growth in the quarter from Hawaiian Telcom TV and high-bandwidth fiber internet services was more than offset by the year-over-year revenue decline in consumer legacy voice and low-bandwidth copper internet services. First quarter consumer strategic revenue increased nearly 1% year-over-year and now represents half of total consumer revenue, up from 43% in the same period two years ago.

Business: Business revenue was $43.9 million, down from $44.8 million in the first quarter of 2016.  Excluding the nonrecurring revenues associated with two large institutional customers, normalized total business revenue increased 3.1% year-over-year and normalized business strategic revenue increased 7.8% year-over-year. 

In business data services, customer demand for high-bandwidth IP-based services continued to rise, as reflected by a 16.1% year-over-year revenue increase in Ethernet and routed network services, 14.1% increase in normalized dedicated Internet access revenue, and 14.4% increase in VoIP revenue. Business VoIP lines grew 15.9% year-over-year to approximately 20,000 lines, offsetting more than a third of total legacy voice access line decline.  

First-quarter business strategic revenue now represents 39% of total reported business revenue, compared to 34% in the same period two years ago. Increases from normalized business strategic service revenue and equipment and related services revenue offset the year-over-year decline in business legacy voice services revenue.

Wholesale: First-quarter wholesale revenue was $12.8 million, a decline of $0.9 million compared to first quarter 2016. Revenue growth in wholesale high-bandwidth Ethernet services on multiyear contracts was more than offset by the revenue decline from certain wholesale customers disconnecting low-bandwidth, legacy circuits on month-to-month service, as well as reductions in rates for certain wireless carriers in exchange for extended terms.

Financials: Total first-quarter revenue was $94.5 million, down from $98.8 million in the first quarter of 2016. The company said that revenue declines related to legacy voice and low-bandwidth internet services were partially offset by revenue increases from consumer video, high-bandwidth business data services, and equipment and related services.