ICG Communications, Inc. Reports Positive EBITDA for Fourth Quarter And Year End 1998 Results

Business Wire, Feb 23, 1999

ENGLEWOOD, Colo.--(BUSINESS WIRE)--Feb. 23, 1999--

$4.1 Million Fourth Quarter EBITDA

63,499 Fourth Quarter Lines Added

ICG Communications, Inc. (Nasdaq: ICGX) ("ICG") today announced, that for the three months ended December 31, 1998, total consolidated EBITDA was $4.1 million, compared to a deficit of $28.1 million reported in the corresponding period in 1997. ICG's consolidated EBITDA deficit for the twelve-month period ended December 31, 1998 was $40.8 million compared to a deficit of $121.2 million for 1997. (EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and non-recurring charges.)

Total revenue for the three months and twelve months ended December 31, 1998 was $121.6 million and $397.6 million, respectively, compared to $71.0 million and $245.0 million reported in 1997. For the current quarter, ICG's revenue increased 71 percent when compared to the fourth quarter of 1997.

"We are pleased to report that ICG achieved its goal of reaching the positive EBITDA milestone before year end," said J. Shelby Bryan, ICG's president and chief executive officer. "Our ability to focus on our core business, to better utilize our facilities-based infrastructure, and to control expenses enabled ICG to attain positive EBITDA. We are confident that ICG is positioned to produce sustainable EBITDA profitability throughout 1999 and beyond as we continue to build relationships with small and medium-sized businesses and Internet service providers."

At December 31, 1998, ICG had 354,482 local lines in service, an increase of 63,499 lines compared to September 30, 1998. During the fourth quarter ICG provisioned 58,146 local lines and added 5,353 local lines with the Texas-based ChoiceCom partnership rollup.

ICG's business strategy is to provide high-quality local, long distance and enhanced telephony and data services to small and medium-sized businesses in California, Colorado, Ohio, Texas, and parts of the southeastern United States. The company also provides high-speed network services to Internet service providers (ISPs) using its nationwide data network with 236 points of presence (POPs).

Revenue Components:

ICG's Telecom services revenue grew 106 percent to $98.0 million for the three months ended December 31, 1998, compared to $47.7 million recorded during the corresponding period in 1997. Telecom services revenue increased $15.5 million sequentially, or 19 percent, compared to the prior quarter's revenue of $82.6 million.

Local services revenue for the three months ended December 31, 1998 was $60.5 million, an increase of $43.5 million, or 257 percent, compared to the same period in 1997. Local services revenue increased $16.4 million, or 37 percent, compared to $44.1 million recorded in the prior quarter. Long distance revenue for the current quarter was $5.2 million and decreased sequentially $1.5 million, primarily due to a revenue reclassification and resale line terminations. Special access service (dedicated transport) revenue was $20.6 million for the quarter ended December 31, 1998, an increase of 33 percent, or $5.1 million, over the same period last year. Switched terminating access (terminating long distance) revenue was $11.8 million for the three months ended December 31, 1998, compared to $15.3 million for the corresponding period in 1997. This decrease, as expected, was the result of the company's initiatives to raise prices.

         Telecom Services Revenue Components
           ($ in millions)
----------------------------------------------------------------------
Three months
 ended            12/31/98  9/30/98  6/30/98  3/31/98   Total    Total
                                                         1998     1997
                  --------  -------  -------  -------   -----    -----
Local services      $60.5     44.1     29.5     23.1    157.2     21.3
Long distance         5.2      6.7      5.8      5.1     22.7       --
Special access       20.6     20.2     17.5     16.1     74.4     55.4
Switched
 termination         11.8     11.6     11.4     14.2     49.0     72.7
----------------------------------------------------------------------
Total Telecom Rev.   98.0     82.6     64.2     58.5    303.3    149.4
----------------------------------------------------------------------

ICG's Network services generated $13.1 million of revenue while the company's Satellite services business contributed revenue of $10.5 million for the quarter ended December 31, 1998.

Improving Core Telecom Operating Margins:

Telecom services gross operating margins (revenue less operating costs) continued to improve throughout 1998. ICG's core telephone business generated $47.9 million of gross operating margins for the three months ended December 31, 1998. The improvement in gross operating margin was attributable to increases in higher margin revenue and better network utilization.

   Telecom Services Gross Operating Margins:
   ($ in millions)
----------------------------------------------------------------------
Three months
 ended              12/31/98   9/30/98   6/30/98   3/31/98   12/31/97
                    --------   -------   -------   -------   --------

Revenue               $98.0      82.6      64.2      58.5       47.7
Operating costs       (50.1)    (48.1)    (43.3)    (45.7)     (43.2)
Gross margin           47.9      34.5      20.9      12.8        4.5
 % of revenue          49%       42%       33%       22%         9%
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