Newly-christened GCI Liberty reports $9M dip in 1Q revenue

  • The newly-named GCI Liberty reported its first results since the acquisition by Denver-based Liberty Interactive Corp. was completed on March 9. Revenue was down nearly $9 million year-over-year because of shortfalls in federal Rural Health Care funding and decline in business equipment purchases. (Photo/Andrew Jensen/AJOC)

GCI Liberty posted first quarter 2018 revenues of $216.4 million, down from $225.3 million last year, after getting hit with a $6 million revenue shortfall in federal funds for providing rural health care broadband services.

GCI may not be able to collect on $6 million in receivables from the Rural Health Care portion of support from the Universal Services Fund, or USF, program, said Senior Vice President and Chief Financial Officer Peter Pounds. Another $4 million decline in GCI’s materials and equipment for contractors contributed to the revenue decline in a year-over-year comparison down by a total of nearly $9 million.

Both losses showed up in the business revenue bottom line of $108.5 million posted for first quarter 2018, down from the $117.9 million posted for the same time period in 2017.

The new name for General Communications Inc. follows the successful merger between GCI and Denver-based Liberty Interactive Corp. that was completed on March 9. Liberty purchased GCI for $1.12 billion in April 2017.

“We’re done seeing transaction-specific expenses,” Pounds said. “There are about 70 people at Liberty who are focused on hundreds of different things. There are a lot of interactions with our numbers team but it doesn’t go down that far. We really are left as an independent operating company that is rolled up in the Liberty complex.”

On March 15, the Universal Services Administration Co., or USAC, announced the funding requests for the year from July 1, 2017, to June 30 exceeded the $400 million in federal funding available for the RHC program. As a result, GCI’s customers will see a 15.6 percent reduction in financial support, Pounds said.

Reimbursements will not be coming until after July 1.

GCI may need to “further reduce the RHC Program support receivables as we continue to work with our partners to come up with a solution that works for all parties,” Pounds said.

In consumer revenue, residential customers are continuing to choose new data streaming options over cable television packages, Pounds said. Consumer revenue was flat at $40.9 million in the first quarter 2018.

The number of basic cable subscribers fell from 106,100 in 2017 to 93,900 in a year-over-year look. That follows the market trends they’ve seen for the past few years, Pounds said. Phone subscribers also continued to decline in the landline category, from 52,700 at this time last year to 49,300 first-quarter 2018.

“That consumer groups continued to decline is representative of people cutting the cord. The recession is also getting to people and it’s a luxury to have video,” Pounds said. “But losing video and moving to data isn’t a big loss. People are updating their data packages and simply not choosing to go with the multi-hundred cable channels.”

Demand for the high-end data packages continues to grow after GCI introduced a new gigabyte service last year that bundles high speeds with unlimited data, he said.

Consumer data revenue increased by $3 million in a year-over-year comparison from $36 million to $39 million. The total number of homes linked to GCI services increased from 250,800 to 252,900 or by 1 percent. In consumer wireless, GCI also saw a slight increase of 1 percent in revenue from $40.6 million to $41 million.

Revenue from cable subscribers fell from $25 million in first quarter 2017 to $22.5 million in 2018’s first quarter. GCI now has 93,900 subscribers, down by 11 percent, or 2,200 fewer cable subscribers, from the same period in 2017.

Business revenue saw slight decreases in every category, including data, voice and video. But Pounds attributes this largely to the loss of RHC funding, which helps pay for live video streaming for health examinations, telehealth and sending large volumes of medical data over the internet.

Another trend is also showing up in companies that give a stipend to employees for their cell phone expenses, Pounds said. That switches what should be wireless business revenue to the consumer category when in the past, that could be tracked as a business expense.

But these decreases were partially offset by increased purchases of additional data and transport services, Pounds said.

Another bright spot is that the federal income tax decrease to 21 percent from 35 percent will continue to help with the bottom line, Pounds said. The company was able to benefit at the close of 2017, finishing in profit after a year of losses.

“The move from a net loss of $9 million in (third quarter) to net income in (fourth quarter) was due, primarily to the Tax Reform Act, which reduces our federal tax rates going forward,” Pounds said. GCI finished the year by posting a fourth quarter profit of $48 million in the final stretch of 2017.

Along with that, Pounds believes the Alaska economy may be turning around.

“I feel more comfortable now than a year ago that there is light at end of the tunnel,” he said. “SB 26 (Senate Bill 26, which provides a government funding source from the earnings of the Permanent Fund) gives more fiscal certainty, and those are encouraging signs. I’m feeling more confident that a year from now I will look back now we’re going to turn the corner. That’s not something I would have said at this time last year.”

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Naomi Klouda can be reached at [email protected].

Updated: 
05/24/2018 - 11:08am

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