Abreis, Re: IWA 2008 Q4 ....
Presuming that you are still invested in IWA, this is my take-home from yesterday’s CC and 10-K.
1. Dividends are fully covered and not at risk. Revenues are growing, albeit modestly. Net operating cash flow is strong. Debt is being paid down even while capital expenditures continue at the historical rate. Note, however, new debt ($44M) will be used to purchase Bishop Communications during the next fiscal year. But, absent any other purchases, this debt can be paid down quickly at the historical debt-reduction rate of about $20M/yr from free cash flow.
2. My biggest surprise was that the new competition, VoIP entrant Mediacom, has been a non-event. Mediacom initiated service using an interconnection agreement between IWA and Sprint in Q2 of 2007. IWA is contesting this usage in state and federal courts. In the interim, IWA’s preemptive counter-measures have been effective. These counter-measures have included aggressive roll-out of a bundled DSL-Video-Phone package and aggressive courtship of business accounts through CLEC subsidiaries. IWA is CLEC certified in all markets served by Qwest in Iowa; the current agreement expires in 2011 (which, coincidentally, is when IWAs long-term debt comes due).
3. I’m keeping a watchful eye on the Iowa Communications Network (ICN). The ICN is fiber optic cable system extending throughout Iowa that currently provides voice and video communications to educational and governmental institutions. Current law prevents use of the ICN for commerical use. The Iowa legislature has considered modifying state law to allow sale of the ICN to a private party, but so far it has not done so.
