After Years Of Losses, FairPoint Turns A Profit In 2015
After net losses of more than $136 million in fiscal 2014, $90.5 million in 2013 and $153 million in 2012, FairPoint reported a net profit of $90 million dollars in fiscal 2015.
The turnaround comes in spite of a continued decline in revenue as the company loses Internet subscribers and telephone customers.
The declines were offset by cost cutting: FairPoint has 334 fewer employees than a year ago, largely due to layoffs last summer.
A contract settlement that followed a bitter union strike a year ago also substantially reduced costs, and the company also says improved customer service has cut overtime and other costs.
Reducing expenses is unlikely to offset declining revenue indefinitely. In a quarterly earnings conference call, FairPoint CEO Paul Sunu said the company’s goal in the coming year is to slow the revenue loss.
A key part of that strategy involves increasing profits from Ethernet services and FairPoint’s fiber network from customers like banks, healthcare networks and wireless carriers.
These areas now account for nearly 30 percent of the company’s total revenues, a growing share compared to telephone and DSL Internet service.
But Sunu said FairPoint is also working to reverse the decline in revenue from residential Internet customers.
In Vermont. FairPoint advertises residential DSL speeds of up to 30 megabits per second (Mbps), but Sunu said only a fraction of customers sign up for the highest speeds.
“I think there’s a lot of room for people to upgrade to the higher speeds. What we’re finding is that people are yet to take those things. It may be cost driven, it may be marketing driven,” he says.
The Vermont Telecommunications Plan calls for universal 1 gigabit upload and download speeds by 2024.
Those speeds are available through some Vermont providers which offer fiber-to-home broadband, and are considerably faster than the cable or DSL speeds available to most residents.
While FairPoint currently offers 1 gigabit service in Portsmouth, New Hampshire, Sunu is skeptical about the role it can play in increasing its residential customer base.
“I’m not exactly sure that from a residential point of view 1 gig is a necessary component of increasing subscriber growth,” he said.
Sunu also sees significant potential in increasing subscriber numbers in the most rural areas.
“We see about half of our market opportunity for broadband growth to be in areas that have fairly low competition,” he said.
FairPoint is also trying to slow customer attrition by raising credit requirements for those interested in signing up for service.
“Part of what we’re doing is raising the credit quality of our customers and looking to make sure that we’re not bringing people on that are chasing the next introductory offer,” he said.
FairPoint is using nearly $53 million in federal funds and investing an unspecified amount of its own money into expanding DSL service in Vermont and elsewhere under a program called CAF-II.