GCI Liberty (GLIBA) reported its fourth-quarter results after the market closed on Feb. 28. GCI, the Alaska telecommunications company that accounts for the vast majority of GCI Liberty's revenue, managed to grow sales thanks to solid growth in consumer-data revenue. But the company's results were held back by a weak Alaskan economy and reduced subsidies for rural healthcare providers.
GCI Liberty results: The raw numbers
GCI Liberty is comprised of Alaska telecommunications company GCI, as well as interests in a few other businesses. The company was formed last year in a complex transaction, and GCI's results only began to be included in GCI Liberty's results last March. This makes year-over-year comparisons for GCI Liberty meaningless.
Here are the stand-alone results for GCI, which now accounts for essentially all of GCI Liberty's revenue:
|
Metric |
Q4 2018 |
Q4 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$226.2 million |
$224.6 million |
0.7% |
|
Operating income |
($210.7 million) |
$3.4 million |
N/A |
|
Adjusted OIBDA* |
$61.2 million |
$65.5 million |
(6.6%) |
Data source: GCI Liberty. *Operating income before depreciation and amortization.
What happened with GCI Liberty this quarter?
- Revenue in GCI's consumer segment was $114.7 million, up 1.5% year over year. The business segment generated $111.5 million, down slightly from the prior-year period.
- Within the consumer segment, wireless revenue declined by 1%, to $45.4 million, data revenue rose 12%, to $41.7 million, video revenue slumped 8%, to $22.7 million, and voice revenue fell 7%, to $5 million.
- The number of consumer wireless lines in service declined by 2% year over year, to 192,700. The number of consumer cable modem subscribers rose 1%, to 125,700.
- Within the business segment, wireless revenue rose 1%, to $23 million, data revenue declined 3%, to $70.1 million, video revenue jumped 54%, to $7.3 million, and voice revenue fell 8%, to $11 million.
- The number of business wireless lines in service slumped 5% year over year, to 21,500, while the number of business cable modem subscribers fell 7%, to 9,200.
- GCI recorded impairment charges of $136 million and $65 million related to goodwill and cable certificates, respectively. These charges stemmed from FCC program-revenue changes and market factors. Operating income was impacted by these charges but were excluded from adjusted OIBDA.
- Revenue from sources other than GCI totaled $8.7 million in the fourth quarter, up 6.4% year over year.
- The fair value of GCI Liberty's public holdings in Charter, Liberty Broadband, and LendingTree was $5.36 billion at the end of 2018, down from $6.14 billion at the end of the third quarter.
Check out the latest earnings call transcript for GCI Liberty.
Anchorage, Alaska. Image source: Getty Images.
What management had to say
Peter Pounds, CFO of GCI, discussed the challenges facing the telecom company during the earnings call:
2018 was a challenging year for GCI. The launch of our new billing system, a stalled economy in the state, and reductions in our rural healthcare service revenues were significant challenges. The billing platform has simplified our business and is improving our customer experience. Additionally, we see continued signs that the economy in Alaska is turning around. Oil and tourism, in particular, are showing signs of life. We look forward to capitalizing on these developments in 2019.
Pounds also gave an update on the USF Rural Health Care Program, which subsidizes the rates for services provided to rural healthcare providers:
There are two appeals related to GCI that are currently pending and the first is in response to the October 10th letter that we received from the FCC whereby they notified us of their decision to reduce our funding for the year ended June 30, 2018 by $27.8 million. We appealed that decision on November 9, 2018. ... The second relates to an RHC customer of GCI's who was denied funding by the Universal Service Administrative Company, or USAC, for the same funding year. This letter was received by the customer on November 30, 2018 and they appealed to USAC on January 29th of 2019.
Looking forward
GCI is still dealing with a weak economy in Alaska, and issues with the Rural Healthcare Program only made things worse. The reduction in RHC Program revenue reduced GCI's revenue by about $7 million in both the third and fourth quarters of 2018.
GCI's results could improve in 2019 if the Alaskan economy picks up. The company is seeing some signs of improvement, but it's too early to tell.
