Primus says cashflow the primary aim

Stuart Corner
Monday, 13 February 2006 05:30

IT Industry - Strategy

Announcing its full year results, the parent company of Australia's Primus Telecom said the primary objective of all the company's operating subsidiaries during 2006 would be the generation of free cash flow.

Chairman and CEO Paul Singh said: "To this end, we will be less concerned about absolute revenue growth; in some cases we may consciously shed low-margin revenue. From an investment perspective, we will concentrate our resources on initiatives that offer the most attractive returns and growth potential, such as our local, digital subscriber line (DSL) and voice-over-Internet protocol (VoIP) initiatives in Canada and Australia."

In the US Primus operates a consumer grade VoIP service over broadband named Lingo, and there were suggestions last year that it would be introduced into Australia. Singh said that Lingo had "significant potential" but that the company did not presently have the resources to develop it and was looking at other options. "....another principal focus for management during 2006 is to develop and execute strategies to generate additional cash to fund promising projects through a combination of external funding for Lingo, potential balance sheet deleveraging, opportunistic equity capital infusion, continued cost cutting and selected asset sales."

In Australia, Primus claims to have over 125,000 DSL customers (up nine percent  from the prior quarter) and says this number exceeds its previously stated goal of 120,000 DSL customers by the end of 2005. "Most new Australian broadband customers sign a two-year contract and  approximately 67 percent also take a bundled local and long distance voice package. Australian residential customers taking a bundled broadband solution now generate over $A95 per month  in revenue," the company said.

It claimed that the build-out of its Australian DSL  infrastructure is on track with 171 DSLAMs installed and ten  more installations in progress. "Migration of existing resale local and broadband customers to the Primus Australian network   has now reached approximately 58,000 services on-net.

Primus reported fourth quarter 2005 net revenue of $US287 million, down from $US 293 million and $US337 million in the prior quarter and the fourth quarter 2004, respectively. The company reported a net loss for the quarter of $US25 million compared to a net loss of $US51 million in the third quarter 2005 and a net loss of $2 million in the fourth quarter 2004.  Results for the Australian business were not broken out.

Singh said: "The progress we began to see in the third quarter turned into strong operating and financial performance in the fourth quarter...Last quarter we stated that we expected 'substantial quarterly improvement in adjusted EBITDA' from the $US2 million recorded in the third quarter. The $US15 million adjusted EBITDA we report for the fourth quarter clearly meets that expectation. In light of this encouraging progress, we have set our 2006 baseline operating assumption at $US60 million adjusted EBITDA, and we plan to manage the business to meet or exceed that target."