Citizens Communications 1Q profit falls on higher expenses

STAMFORD, Conn.—Telecom service provider Citizens Communications Co. said Monday its first-quarter profit dropped 33 percent, weighed down by increased operating expenses.

For the quarter ended March 31, net income after paying preferred dividends slipped to $45.6 million, or 14 cents per basic share, from $67.7 million, or 21 cents per basic share, a year earlier.

Quarterly sales grew 2 percent to $569.2 million from $556.1 million, helped by the March acquisition of Commonwealth Telephone Enterprises and the October acquisition of Global Valley Networks. The prior-year period included $38.7 million related to the settlement of a switched access dispute.

Analysts polled by Thomson Financial predicted earnings of 16 cents per share on sales of $573 million.

Excluding the acquisitions and settlement, revenue dipped 2 percent from the prior year as increased data and Internet services revenue was offset by lower access lines, subsidy revenue and switched access revenue. Total operating expenses climbed to $404.9 million from $362.8 million.

The company lost about 43,100 access lines, of which 15 percent were second lines, during the first quarter of 2008 and had more than 2.39 million access lines at March 31.

Citizens Communications added about 20,200 high-speed Internet customers during the first quarter and had more than 543,000 high-speed Internet customers at March 31. The company added about 7,800 video customers during the first quarter to total more than 101,400 video customers.

Looking ahead, Citizens raised its free cash flow estimate for 2008 to between $470 million and $495 million due to the positive impact rebate checks will have on its cash paid for income taxes.