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ILEC 3Q11 Quarterly Results: HickoryTech

Business Revenues Rise 10% YoY

Freshly named one of Forbes 100 Best Smallest Companies, HickoryTech (Nasdaq:HTCO) overcame a mediocre performance from its telecom segment in 3Q11 to turn in modest revenue and cash flows gains for the quarter. Overall, HickoryTech’s top line rose 4% YoY to $45.2m and operating cash flows improved 2.5% YoY thanks to continued strong performance from its business sector.

While telecom revenues slipped 4% to $17.9m in 3Q11, business revenues increased 10% to $28m, fueled by increased sales of Cisco voice and data communications equipment. Equipment sales in 3Q11 jumped sharply 35% YoY, or $4.3m. Hardware sales though tend to fluctuate quarter to quarter based on the timing of customer orders and new customer adds, so the growth HickoryTech enjoyed in 3Q11 is not likely be sustained.

The telco is however counting on its ongoing fiber build to deliver growth down the road. The company broke ground on its Greater Minnesota Broadband Collaborative project in August, a $24m initiative funded with $7.2m of HickoryTech’s funds and a $16.8m grant from the NTIA. While some of the costs associated with the build contributed to a decline in net income for the company in 3Q11, management believes it is an investment that will pay dividends long term.

On the 3Q11 earnings call, John Finke, ceo of HickoryTech discussed the fiber project and its future benefits. “The majority of the first fiber route will be completed in 2011 and we will begin construction on the northwestern Minnesota route in 2012. Upon completion of this project in 2013 we will add approximately 430 fiber route miles creating one of the most extensive fiber footprints in our region. The fiber route will serve customers in the healthcare industry, education and will create opportunities for us to offer HickoryTech business services in communities along these routes.”

The fiber build supports HickoryTech’s business and broadband strategy, which Finke believes has positioned Tech for “sustained and reliable growth.” Year to date, business and broadband services account for 70% of its revenue, a percentage that is certain to rise in the future.  

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