Talk America Inc. posted its fourth consecutive quarterly profit yesterday, making the Reston-based firm one of the healthiest in an industry where few local telecommunications companies are still standing.
Talk America, which buys bulk telephone service at a discount from major phone companies and then repackages and resells it to consumers at prices lower than the big companies can, said it earned $13.4 million (45 cents per share) on revenue of $79.1 million during its third quarter. That compared with a loss of $162.3 million ($6.18) on revenue of $126.3 million during the same period a year ago. Most of the decline in revenue was due to a falloff in the company's long-distance business, which it is no longer marketing except to package it with local service.
The company added 32,000 customers during the quarter. It now has 276,000 customers who buy both local and long-distance services, and it expects that number to increase to between 315,000 and 325,000 by the end of the year.
Talk America also completed a 1-for-3 reverse stock split during the quarter and retired $13.5 million of debt after the quarter, which will reduce its interest payments by $1.4 million over the next three years.
"We've really increased our marketing," said Gabriel Battista, chairman and chief executive of Talk America. The company has started to advertise at events, as well as through telemarketing, television, radio and online media, he said.
Talk America, which employs about 1,000 people, improved its performance by solving some costly earlier problems, Battista said. Until a year ago, the company had poor computer systems that could not handle the complexity of managing provisioning, billing and credit checking, he said. Last year, it invested $50 million in its administrative systems, which made it easier to weed out delinquent customers and provide service faster, he said.
Talk America is also benefiting from a revival in the business of reselling local telecommunications services.
Unlike companies that spent billions of dollars to build their own networks, Talk America leases lines and network equipment from incumbent phone providers such as Verizon Communications Inc. and SBC Communications Inc. and markets those telecommunications services under its own name. In the past year, this has become a popular way of competing against the main local phone companies because it does not require a lot of capital to start the business.
The company was founded in 1989 as Tel-Save Inc., a long-distance reseller. In May 2000, shortly after Battista took over control of the company, it was renamed Talk America and began selling local service bundled with long-distance.
"Long distance was not a viable business because competition was so aggressive and prices were falling," Battista said. Hundreds of companies were already offering business customers alternatives to their local service, so Talk America decided to sell to residential consumers because "nobody else was doing it."