General Communication Bleeds Subscribers

Alaskan telecommunications company General Communication (NASDAQ: GNCMA) reported its third-quarter results after the market closed on Nov. 1. Revenue continued to decline as the company shed video, voice, and wireless subscribers, with growth in data revenue unable to fully offset that weakness. The state of the Alaskan economy continues to be a major headwind, but the merger transaction with Liberty Ventures Group will add geographic diversity to the resulting company. Here's what investors need to know about General Communication's third-quarter report.

General Communication: The raw numbers

What happened with General Communication this quarter?

  • Consumer revenue decreased by 4.1% year over year to $110 million. Within the consumer segment, wireless revenue slumped by $5 million, primarily due to lower handset sales. Subscriber losses during the quarter included 1,900 cable modems, 2,300 video subscribers, and 300 wireless subscribers. The recession in Alaska continues to be a major headwind.
  • Business revenue fell 0.6% year over year to $121 million, driven mostly by slumping voice revenue. Business data revenue grew by 2.8% year over year to $76.9 million, but it wasn't enough to offset a 15.3% decline in voice revenue.
  • Pro forma adjusted EBITDA, which adds back charges related to General Communication's merger transaction with Liberty Ventures Group, was $80.8 million during the third quarter, up 3.3% year over year.
  • Selling, general, and administrative expenses totaled $91 million during the quarter, flat year over year when excluding $2 million related to the Liberty transaction.
  • General Communication expects pro forma EBITDA for the 2017 between $300 million and $315 million, excluding costs related to the Liberty transaction. Capital expenditures are expected to be approximately $165 million.

What management had to say

CFO Peter Pounds discussed the weak economy in Alaska during the conference call:

CEO Ron Duncan stressed that the company is likely gaining market share even as the number of subscribers declines:

Looking forward

General Communication's revenue decline wasn't quite as severe as it was during the second quarter, and adjusted EBITDA increased slightly. The story remained much the same: Growth in data revenue was unable to offset declines in video and voice revenue.

The Alaskan economy will become less of a concern for the company once its transaction with Liberty closes. This deal will combine General Communication with certain assets of Liberty Ventures Group, creating a new company, GCI Liberty, that will be less dependent on a single state.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends General Communication. The Motley Fool has a disclosure policy.