Two theories compete to explain why Time Warner Telecom’s share price has grown from around $4 to $7 in the past three months.
The first is that Time Warner Telecom may be acquired by Denver-based Qwest, which is on the hunt for long-distance assets after losing the recent takeover battle for MCI.
But the company’s financial statements released Monday bolster the more old-fashioned idea: the company is improving its bottom line. Revenues and investments are up, and the company is losing less money.
The Douglas County-based provider of corporate communications services reported $346 million in revenue in the first six months of this year, up 7 percent from the same time period last year.
Time Warner Telecom also spent nearly $82 million – up 8 percent from the first half of last year – to expand its fiber- optic network in 44 urban markets in the U.S., which now include direct fiber connections into 5,500 office buildings.
Operating losses as of June 30 were $62 million, down from $66 million at the same time last year.
Analyst Donna Jaegers of Denver-based Janco Partners said Time Warner Telecom must continue investing in its network and increasing its customer base to compete against soon-to-be-merged telecom titans such as MCI-Verizon and SBC-AT&T.
“Time Warner Telecom is just getting the scale they need,” said Jaegers, who predicts the company will start making money by mid-2007. She is one of several analysts who have started covering the company over the last year.
Time Warner Telecom’s stock was riding well above $70 in early 2001 before the telecom meltdown that weeded out many of its competitors. By July 2002, the stock was trading below $1.
The company’s stock made a brief comeback to $12 by January 2004 but once again sank below $4 within several months.
“That was a false start,” Jaegers said. “It was a sign the company was not going out of business. This rise is based on fundamentals.”
Larissa Herda, Time Warner Telecom chief executive, said in an interview with The Post last month that the company is doing a better job explaining its financials to analysts.
The fastest-growing part of the company’s sales comes from small and mid-sized businesses that use Time Warner Telecom’s fiber-optic network for creating data networks.
Revenues from other telecom carriers that lease Time Warner Telecom’s lines are shrinking. Though the company extended contracts in June with SBC and AT&T, questions remain around future revenue from MCI, Global Crossing and Level 3. In the latest results, corporate accounts grew to 53 percent of the company’s revenue, while carrier accounts shrank to 39 percent.
Time Warner Telecom’s stock rose 19 cents Monday to close at $6.98, up from just above $4 in early May.
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
