While we are on the topic of XO, here is a press release of theirs that covers their 1Q08 financial results.
Their Core Data and IP revenue is growing at a very respectable pace–30%. However, their overall growth rate is only 3.2% as legacy TDM services are shrinking rapidly (-17.6%) while Core Integrated Voice is growing only modestly (2%).
EBITDA shrunk materially. 1Q08 was only $7M, compared to $20.3 in the prior quarter and $37.2 a year ago. Capital jumped up to $65M, from $40M in earlier periods. To explain the EBITDA drop and capital spike, XO cites that it is investing, both in the form of sales-related OPEX and capital, in the growth of the Core Data and IP business.
Posted by Dan Caruso (May 15, 2008)
May 16th, 2008 at 3:18 pm
Well Q3 should be better for XO. Our clients just received a rate increase. XO states “increased costs” and “making significant capital investments to maintain our state-of-the-art, award winning nationwide network” as the reasons. Is that accurate? We like XO and we recommend them when appropriate, but costs should be going down, correct?
Here are the California rate increases which represent about a 10% increase:
http://www.xo.com/SiteCollectionDocuments/information/Tariffs/Advice_1234.pdf
Here are all the states:
http://www.xo.com/about/policy/Pages/tariffs.aspx
May 17th, 2008 at 4:07 pm
In general, costs continue to go down in telecom–although at a vastly slower pace than a few years ago. However, there are exceptions to this. The big phone companies raise rates for certain SMB services. They also raise rates for T1s and for LD minute termination. These price increases allow some telecom’s to follow suit.
Higher bandwidth services will continue their trend toward lower price by bit of bandwidth.
Thanks for the comment and for reading the blog.