Suddenlink’s second quarter results illustrate several trends in the U.S. largely-rural fixed network service provider market. Revenue growth is lead by high speed access services, not legacy services.
The core product now is a bundle. Bundled residential customers represented 66 percent of total residential customer relationships at June 30, 2014, an increase from 65 percent at June 30, 2013.
Though representing 28 percent of total residential customer relationships at June 30, 2014, versus 26 percent at June 30, 2013, the triple play package of video entertainment, high speed access and voice represents the growth trajectory at Suddenlink.
In a saturated and competitive market, Suddenlink is unlikely to add too many customers based on organic growth. Instead, it largely will have to increase the number of services purchased by each customer.
Second quarter revenues of $579.9 million grew six percent compared to the second quarter of the prior year, highlighted by high speed Internet revenue growth of 15 percent.
High-speed Internet service revenues rose 15 percent, while telephone service revenues grew one percent. And the business context has changed. With the advent of 1-Gbps services, Suddenlink believes it has to compete.
Suddenlink Chairman and CEO Jerry Kent said Suddenlink “will enable one-gigabit speeds” to “retain our competitive advantage in Internet services."
Total residential customer relationships were 1,403,500 at June 30, 2014, an increase of 29,600, or 2.2 percent, from June 30, 2013.
Including commercial services, primary service units (one sale of a high speed access, voice or video service) were 2,903,600, an increase of 110,500, or four percent, over the prior year.
Including commercial services, revenue generating units were 3,785,100, an increase of 145,000, or four percent, from June 30, 2013.
Total average monthly revenue per basic video customer for the second quarter was $163.92, an increase of nine percent compared to the second quarter of the prior year. And that tells the story: revenue per account is growing faster than the number of new accounts.
As is the case for a few of the larger rural telcos or cable companies, commercial revenue (sales to business customers) is an important new revenue source. Commercial revenue grew 11 percent compared to the second quarter 2013, including 18 percent year-over-year growth in commercial high-speed data, telephone and on-net carrier revenue.
Commercial revenue totaled $81.8 million, or 14 percent of total revenue, in the second quarter 2014, representing growth of 11 percent compared to the second quarter 2013.
At June 30, 2014, Suddenlink served approximately 1.4 million residential customers, and Suddenlink`s RGUs were comprised of 1,168,800 basic video, 881,500 digital video, (about two million video units) 1,103,300 residential high-speed Internet, and 534,600 residential telephone customers.
The video business, in terms of units sold, is twice as big as high speed Internet, which in turn is twice as big as the voice business. That is a different profile from the largest U.S. cable companies, where high speed access, in terms of revenue, is as big as the video business.
Approximately 66 percent of Suddenlink`s residential customers subscribe to bundled services, compared to 65 percent a year ago.
Approximately 391,400 of Suddenlink`s residential customers receive video, high-speed Internet, and telephone services as part of a triple play bundle, representing 28 percent of Suddenlink`s total residential customer relationships.
Non-video residential customers of approximately 319,900 at June 30, 2014, represent 23 percent of total residential customer relationships, and grew 20 percent.
Suddenlink`s average revenue per user for the second quarter 2014 was $163.92, an increase of nine percent compared to the second quarter 2013.
Basic video customers decreased by approximately 18,700 customers during the second quarter of 2014, an improvement compared to a loss of 23,100 basic video customers in the second quarter of 2013.
Digital video customers decreased by approximately 6,500 customers during the second quarter of 2014, an improvement compared to a loss of 8,200 digital video customers in the second quarter of 2013.
Residential high-speed Internet customers increased by approximately 200 during the second quarter 2014, an improvement compared to a loss of 8,700 residential high-speed Internet customers in the second quarter of 2013.
At June 30, 2014, estimated residential high-speed Internet penetration was 36 percent of high-speed Internet capable homes passed.
During the second quarter of 2014, commercial high-speed data customers increased by approximately 1,500. These commercial customers are not included in total RGU counts.
Including these commercial customers, high-speed Internet customers increased 83,800, or eight percent, over the prior year.
Residential telephone customers grew by approximately 7,100 during the second quarter 2014, and 46,900, or 10 percent, during the trailing twelve months.
At June 30, 2014, estimated residential telephone penetration was 21 percent of telephone capable homes passed. During the second quarter of 2014, commercial telephone customers increased by approximately 2,200 customers, and increased by approximately 8,100 over the trailing twelve months, or 29 percent.
These commercial customers purchase 2.8 lines on average and are not included in total RGU counts. Including these commercial customers, our telephone customers increased 55,000, or 11 percent, over the prior year.
Suddenlink operates primarily in rural markets, and is the seventh largest cable operator in the United States.
That makes the company somewhat analogous to Windstream and Frontier Communications, in terms of high speed access markets and customers, or Mediacom and Charter Communications, in terms or video customers and markets.
Suddenlink’s networks pass 3.1 million homes in the United States as of June 30, 2014. Suddenlink serves approximately 1.4 million customers as of June 30, 2014.
The Company's customer base is clustered geographically with approximately 96 percent of its customers located in the ten states of Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio, with 91 percent of customers located within the top 20 primary systems.
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