BTI Telecom Posts Solid Third Quarter Results; Revenue Up 17 Percent - Company Financial Information

Cambridge Telcom Report, Nov 22, 1999

BTI Telecom Corp., a facilities-based integrated communications provider (ICP) offering voice and data solutions to businesses within the Southeast, today reported solid third quarter 1999 results.

BTI's revenues for the third quarter 1999 were a record $72.1 million, a 39 percent increase over the same period last year and a 17 percent increase over second quarter of 1999. This increase is a result of growth in all three of the Company's primary revenue streams:

* retail integrated voice - local/long distance * data services * wholesale long distance

"BTI's third quarter results demonstrate the success of our strategy to offer our customers an integrated and growing suite of telecommunications products and services," said Peter T. Loftin, chairman and chief executive officer. "We continue to bring new products on line, such as high-speed DSL services, that enhance our ability to be THE telecommunications provider of choice to the business community in the Southeast. Bundling our services is exactly the type of solution our business customers are seeking."

EBITDA remained positive during the third quarter at $193,000. This represents a $2.4 million increase over the loss in the same period last year and a decrease of $700,000 from second quarter. EBITDA for the quarter was influenced by the effects of hurricanes Dennis and Floyd, the on-going delays by Qwest Communications in delivering the Company's dark fiber, which was originally scheduled for completion in the second quarter of 1999, and the changes in customer calling patterns associated with the Company's pre-paid phone card program. Management believes the short-term effects of these factors will not adversely impact the long-term success and strategy of the Company.

Capital Market Initiatives BTI filed its initial S-1 Registration Statement with the SEC on July 16, 1999. Subsequently, the SEC notified the Company that it would not review this S-1, which clears the way for BTI to initiate a public offering on its own timetable. In addition to the on-going monitoring of public market conditions with its investment bankers, BTI has closely watched the recent significant investments within the telecommunications sector by private equity funds. As a result, in September, BTI retained Wachovia Securities to evaluate private equity placement opportunities.

During the third quarter, BTI expanded its total debt facilities to $120 million. In addition to its existing $60 million revolving credit facility with GE Capital, the Company closed on a project finance facility with Bank of America providing up to $60 million of availability. The new facility, which runs coterminous with the GE facility, will be used to finance the purchase of BTI's 3,200 -- mile dark fiber IRU from Qwest Communications and the purchase of related optronics from Nortel Networks. Under the terms of the Bank of America facility, availability is limited to $37.5 million until the Company raises additional equity.

"The availability of up to $120 million through the expansion of our credit facility gives BTI the flexibility to continue executing our business plan and to tap into the capital markets when the timing is optimal," said BTI's chief financial officer, Brian K. Branson. "We also now have the latitude to carefully weigh the most suitable equity funding alternatives for meeting BTI's growth strategy."

Local & Data Offerings Meet Customer Demands In line with BTI's business strategy, the Company continues to expand its integrated suite of products to meet customer demands through the growth of its local and data services. This strategy provides the type of cost-effective solutions sought by businesses that want a single provider to satisfy all their communications requirements.

During the third quarter, BTI increased the number of commercial lines it sold by more than 9,000 bringing the total number of local access lines sold to more than 84,000, including more than 75,000 lines in service. BTI's commercial lines at the end of the quarter represent an increase of more than 47,000 lines from the same period in the prior year, or an increase of 130 percent. As of September 30, approximately 23 percent of the in-service and approximately 60 percent of the pending lines are facilities-based. During the same period last year, the Company had approximately 6 percent of its lines on-switch. This progression demonstrates BTI's continued commitment to deploying its own infrastructure to serve its customer base more cost effectively.

To provide additional facilities-based opportunities to its customers, BTI activated a Lucent Technologies 5E2000 local switching system in Jacksonville, FLA. This brings the total number of these switching systems to nine. Installation of a tenth system began during the fourth quarter in Tampa, FLA.

An integral component of BTI's local strategy is the co-location of digital loop carriers (DLC's) in ILEC central offices. These co-locations also provide the Company with the opportunity to rapidly deploy its DSL services. During the quarter, BTI applied for approval for more than 40 additional ILEC co-locations, which, when completed, will bring BTI's total co-locations to approximately 100. This brings BTI's infrastructure closer to its customers and provides easier access to more comprehensive products such as facilities-based local and DSL services.