Choice One Says It Hits Milestone

March 24, 2003
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GRAND RAPIDS — The language is technical, but the employees of Choice One here and at company headquarters in Rochester, N.Y., and at the firm’s third big center — Green Bay — have received some happy news.

Choice One has reported $3 million adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the fourth quarter of 2002. That figure came at the end of a fiscal year with $290 million in revenue, up more than $100 million from 2000.

Its chief operating officer says the firm is on track to positive cash flow in the middle of this year.

The company celebrates its fifth anniversary in June.

The firm, founded and headquartered in Rochester, posted its first positive monthly EBITDA last August.

Kevin Dickens, the firm’s chief operating officer, told the Business Journal that from its start of service in Albany and Rochester, Choice One has expanded to 29 second- and third-tier metropolitan markets in 12 states comprising the northeast quadrant of the country, excluding Vermont and New Jersey.

Dickens explained that the company has maintained constant focus on its business plan to provide what he called core telephone services — local, long-distance, data and Internet — to small and middle-sized firms and institutions such as school districts.

He said the firm stuck to that plan from the first, avoiding the temptations that caused many telecom businesses to cease operations.

Dickens described the period from 1998 through 2000 as one of euphoria, when many telecom firms were founded explicitly to provide the high-speed connections that firms needed to avail themselves of all the promised wonders of the Internet.

“What I think history showed us in the late ’90s through 2000,” Dickens said, “is that money wasn’t difficult to come by. But what became difficult was to find a business plan that you could execute that was going to generate revenue and profit.”

He said a number of telecom companies were formed in the expectation that businesses would need high-speed Internet access. “You needed core telecom companies to make things happen,” he said.

“Unfortunately, the entire business plan of some of those firms,” he added, “was that they were offering nothing more than high-speed pipes. Perhaps some of them assumed they were going to grow fast and be bought out.”

But as the economy started to turn down and the dotcom breakup started, Dickens said, the need for that access was one of the first things that started to fall apart.

“But what we went after from the first, and have focused on all along, was providing excellent service to what we felt were underserved cities and businesses.

“We were very capital intensive and we knew we were going to lose money for a number of years. And our focus first was on core service.”

Dickens said there is a strong reality behind the digital hype and connectivity promises of the late 1990s.

“All these exciting, glamour things are going to happen,” he said, “but they’re just not going to happen at the pace everyone thought. And when they do happen, Choice One will be in a position to serve businesses that need them.”

He said Choice One has the capacity and the competency to do Web hosting and design. “And everywhere we operate, we can offer high-speed Internet service and advanced network services to companies. But that’s just a piece of our business.

“We didn’t walk away from the fact that we can offer core long-distance services and core local telecom services,” he said.

“The fact is our business can be positioned extremely well to address the exciting needs as well as the core needs, because the synergies are absolutely there and the competencies are absolutely there,” he said

“There are some things we anticipated, but they’re happening slower. And that’s okay. It’s not a make-or-break issue about when we offer those services. It’s that when people need all the bells and whistles, you flick a switch.”

He said Choice One furnishes some exotic dotcom services and things like T1 lines to clients that are big businesses.

“But we’re continuing to track our original plan: providing the best service at very competitive rates to companies with 12 and 15 lines. And that August EBITDA was a milestone for us.”

He said that it would be ideal to arrive at positive cash flow to mark the company’s fifth birthday.

“I don’t know if that’s going to happen,” he said. “We need to keep very consistent and very focused.”

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