Glitches hurt HawTel earnings
By Rick Daysog
Advertiser Staff Writer
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Hawaiian Telcom reported a net $32.2 million loss during the second quarter of 2006 after it suffered major customer-services glitches and lost more than 35,000 phone-line customers.
The state's largest phone company also said that net losses narrowed by about $20 million from the year earlier period.
"Our second-quarter results were essentially in line with our expectations, but there were several transition-related disruptions to our business that caused us to incur higher-than-anticipated costs, which we do not believe are a true reflection of our underlying business," said Michael Ruley, Hawaiian Telcom's chief executive officer.
The second quarter is Hawaiian Telcom's first as a stand-alone company.
In May 2005, The Carlyle Group acquired the phone company from Verizon Communications Inc. in a deal valued at $1.6 billion. In April, the new owners took over customer services functions from Verizon.
Hawaiian Telcom said the number of its land-line phone customers declined 5.3 percent to 626,367 during the latest quarter, compared with 661,569 last year.
The drop in customer telephone lines was partly offset by an 8.8 percent increase in Internet customers.
The phone company said the number of its high-speed Internet connections increased 23.7 percent.
Hawaiian Telcom said its quarterly results also were affected by customer-services glitches after it took over the phone company's backshop operations.
Since April, about 12,000 customers received inaccurate long-distance bills and about 9,000 customers with automatic bill payment plans were overcharged. Customers also complained about long waits for customer services.
The problems forced the company to hire more than 200 temporary workers to handle repair, technical support and customer services. Hawaiian Telcom said the added hires and other transition expenses cost the company an extra $6.6 million during the quarter.
Overall, Hawaiian Telcom said its expenses decreased 5.5 percent to $146.3 million from second quarter 2005's $154.8 million.
Downtown resident Alexander Kane said it took Hawaiian Telcom 26 days to transfer his phone service to a new address.
The 86-year-old Kane, who requested the change on June 30, said his wife, Roberta, was once put on hold by Hawaiian Telcom for 25 minutes when she called to follow up on the transfer.
Alexander Kane said he visited Hawaiian Telcom's downtown office in early July and was told to fill out a new request.
"I just felt that it was bad planning on their part to allow this to happen," Kane said. "It was very frustrating."
Reach Rick Daysog at rdaysog@honoluluadvertiser.com.
Correction: Hawaiian Telcom's net loss in the second quarter narrowed by about $20 million from the year earlier period. The company lost 35,000 access lines over the previous year. Some of the customers canceling access lines did so as they dropped a second phone line that had been dedicated to dial-up Internet and switched to the company's high-speed Internet service, which requires just one line. The annual increase in high-speed Internet customers was 23.7 percent. Information in a previous version of this story was incorrect.
