Time Warner Telecom Tops $1 Billion in 2007

In its first full year of operations following its acquisition of Xspedius, Time Warner Telecom Inc. (NASDAQ: TWTC) reported $1.084 billion in revenue for the year ended Dec. 31, solidifying its position as a super-tier 2 carrier behind two other post-merger CLECs, PAETEC Communications and XO Communications Inc.

The consolidated company (Time Warner Telecom/Xspedius) grew total revenue by $271.3 million or 33 percent for the year. It also grew enterprise revenue to $747.7 million, a 49 percent increase. Carrier revenue grew 7 percent to $291.4 million. The company also reported modified EBITDA of $339 million and a net loss of $40.3 million for the year. Fourth quarter 2007 results were $279.5 million in revenue, $93.3 million in modified EBITDA and a net loss of $5.3 million.

Time Warner Telecom acquired Xspedius in fall 2006. That year the company freed itself from controlling owner, Advance/Newhouse, and refinanced its debt.

“These events set the stage for 2007 to be a pivotal year, not only to successfully complete our integration, but also to implement a much stronger operational foundation to support future growth,” said Time Warner Telecom’s Chairman, CEO and President Larissa Herda in Tuesday’s earnings call. “The significance and magnitude of this achievement cannot be over-emphasized. The fact that within 12 months of a major acquisition the combined companies’ operations have been converted into one consolidated foundation of networks, systems, processes and organization is rarely, if ever, achieved in this business. Even more notable is that TWT has been able to deliver solid financial and operating results during this very demanding integration period.”

Herda said that despite all the resources focused on integration and accompanying low efficiency, the combined company grew revenue per employee, testifying to an ability to scale the business.

“We have a wealth of opportunity with the markets we acquired,” she said. “We are leveraging a multistep approach in our most recently acquired markets in three key areas.”

• The first step was integrating acquired markets that overlap with core markets.

• The second was investing in non-overlap markets, adding strategic personnel, including a general manager, sales people, technicians and engineering support. Additionally, the company added its strongest-selling advanced products, including IP-based services, such as Ethernet. “None of these markets previously had the skills or products to produce optimal results and that is why we see them as a key opportunity for growth,” she said, noting progress in the first 10 markets where it has deployed this strategy. One such market, Nashville, Tenn., added 10 new on-net buildings in the last half of 2007 along with 50 new and existing customers, she added as an example.

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