TW Telecom Muscles On

November 6th, 2008 by · 1 Comment

TW Telecom reported earnings after the bell today, although their CC is tomorrow morning.  I wasn't too far off in my guesses - too high on network revenue and too low on data but it canceled out.  Overall, revenue of $291.6M was exactly what they promised in September, slower growth reflecting some churn from spreading economic weakness relative to their strong second quarter.  Modified EBITDA of $102.6M, however, was very strong, at 35.2% modified-EBITDA margins the company improved more than a percentage point over the second quarter.  Earnings per share of $0.03 were also up from $0.00 in Q2, both of which included impairment charges.

Rather than back away from spending in this difficult economic environment, the company raised its capex spending to $73.3M from $65.5M last quarter and $52.8M in Q3 of last year.  That's what you can do when you have positive earnings and cashflow, and I think we'll see more of it.  All in all, TW Telecom did what they said they would do, and promised to do more of it.

In light of Cisco's results today, in which economic weakness is seen spreading further - one can't help but notice that while fiber based telecoms are feeling effects, they mean slower growth rather than contraction.  Not that the market ever notices, of course.   And about the possibility of M&A or other interesting moves?  The earnings PR did include this relevant quote from CFO Mark Peters:

We continue to be in a strong liquidity position with no significant debt maturities until 2013, no financial maintenance covenants(9), $334 million in cash, and an undrawn revolver, which provides us a great deal of flexibility to make the right investments for ongoing opportunities.

The undrawn revolver is for $100M, giving them $434M in total firepower though they probably wouldn't wish to use more than half.  So the company certainly has some cash to play with, but they would need to use stock to do any major deal, e.g. an all stock deal for XO has always seemed like a good fit to me... 🙂

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Categories: Financials · Mergers and Acquisitions · Metro fiber

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  • jeremy drane says:

    if TWTC gets ahold of XO’s fiber look out. history has shown that owning the local assets is the best course of action. LVLT focused on intercity, much like T did when they split up the company, and we see where that got T. TWTC is doing it the right way, that fo sho!

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