Neutral Tandem Reports, Awaits Intercarrier Reform Details

tndm reported its Q3 earnings this morning, posting revenues slightly above expectations as their per minute voice pricing held steady and pricing pressure in the IP transit stabilized somewhat.  Earnings per share were below expectations, but mainly due to several one time events including a currency loss on an intercompany loan (i.e. Euros to Tinet I presume) else they would have been roughly in line.  Here’s a quick summary of the company’s numbers in context:

($ in millions)	Q4/10	Q1/11	Q2/11	Q3/11	FY11Guidance
– IP/Ethernet	16.1	15.7	15.0	16.6
– Voice	47.7	50.7	50.1	50.7
Revenue	63.8	66.4	65.1	67.3	256-268 (high end)
Adj. EBITDA	22.8	24.2	22.8	21.0	91-95 (low end)
Earnings per share	0.18	0.24	0.20	0.18
Billed Minutes	29.9	31.7	32.5	32.9	130-137
Capex	8.8	5.6	7.2	6.8	20-24

On the regulatory front, Neutral Tandem says that early indications suggest that the FCC’s intercarrier compensation reforms will be favorable to them, in that they feel the competition is more dependent on arbitrage that will be going away.  They intend to host a call when the details finally come out.  Those details are eagerly awaited by players across the space, as they will probably be material in some cases.  The clarity that real reform will bring is something that everyone except the lawyers is looking forward to.

On Monday Neutral Tandem announced a new hosted UC product line which could change the company substantially over time.  It also adds a new dimension to the M&A possibilities for the company.  They very well might choose to buy a cloud services provider or two to speed their entry into additional product lines.

Guidance for the full year was maintained, with the trajectory favoring the high end for revenue and the low end for EBITDA.

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Categories: Financials · Internet Backbones · VoIP