Over on the European earnings front, euNetworks saw the diverging trends from the second quarter continue on through the third as they shifted into a higher capex gear with their recently announced network expansion projects. EBITDA rose even as revenue fell, and both EBITDA margins and on-net buildings passed key milestones despite continued headwinds of churn:
|in millions of €||Q3/12||Q4/12||Q1/13||Q2/13||Q3/13|
|Adj EBITDA margin||13.7%||20.8%||23.0%||24.5%||26.1%|
|Proxy Cash Flow||(3.1)||(0.0)||2.1||1.1||(2.4)|
Revenue churn came from legacy SDH and IP VPN customers from LambdaNet and from the low latency financial vertical as consolidation and microwave continued to take a toll. They’re working to reduce churn, but aren’t quite ready to say it’s over yet with a bit more possible in Q4 when it comes to those two areas. But despite the headwinds, EBITDA margins surged past the 25% mark on improved revenue mix and further streamlining, while on-net buildings crossed the 1,000 barrier.
The higher capex reflects euNetworks’ recent network expansion projects hooking up Stockholm, leasing capacity on to Moscow, and putting in duct and fiber west from London out to Slough. There are probably more projects on that list, and while the inorganic possibilities out there haven’t yet materialized they are still lurking out there somewhere.
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