Wednesday, August 26, 2015

3 RLEC Revenue Comparisons

Windstream reported revenue for 2Q 2015 this month. This is after the REIT spin-off, Communications Sales and Leasing Inc. (CS&L), which now trades on NASDAQ.

The numbers break down like this:

Total revenues were $1.4 billion for 2Q2015
Consumer service revenues were $314 million
ILEC small business revenues were $108 million
Carrier service revenues were $156 million
CLEC Small Business service revenues were $146 million
Enterprise service revenues were $485 million

Gary Kim has a comparison of WIND and Frontier (soon to own more VZ assets) from 2012. "At December 31, 2011, Frontier had 3,103,800 residential customers and 309,900 business customers. For the six-month period ending Dec. 31, 2011, Frontier earned $692 million in business customer revenue, and $544 million in consumer revenue."

"For Windstream, results were even more pronounced. Business revenue in the fourth quarter of 2011 were $888 million, while consumer revenues were $118 million." Compare that to 2015 where consumer revenue is now $314M (which represents 22.4% of revenue)! After buying RLECs, data centers, KDL fiber and a strategy for out of network CLEC business revenue.

Another RLEC that grew up for comparison: "Of $4.4 billion in CenturyLink second quarter 2015 revenue, business revenues represented $2.7 billion while consumer revenues were about $1.5 billion. In other words, the business segment represents 61 percent of company revenue," writes Gary Kim.

"Frontier Communications total revenue of about $1.4 billion as well, with consumer revenue of about Total residential revenue was stable at $615 million for the second quarter of 2015, while total business revenue was $621 million. So a bit more than half of revenue was generated by business customers." [Gary Kim again]

It is interesting how important low-margin consumer revenue is to the RLEC business model matrix.

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