From Deseret News archives:
Broadweave unsure when it will pay Provo
During a presentation to the Provo City Council, Broadweave CEO Steve Christensen said aggressive marketing has added more than 1,000 new subscribers to the network the company bought from Provo for $40.6 million in July. Broadweave also said attrition is far lower than expected.
Broadweave boosted revenue by 10 percent in October and by another 10 percent in November by revamping a messy customer database and improving efficiency, Christensen said.
Also, 87 percent of new customers are signing two- or three-year agreements and sign up for an average of 2.2 of the three services — Internet, phone and TV — offered on the network. Both are significant improvements over iProvo's performance.
In November, the company skipped its monthly $277,000 payment to retain the cash reserves necessary to hook up new customers. The company spends about $750 on equipment every time it adds a new customer.
Christensen expects more growth. The national take rate in cities with fiber-optic networks is 54 percent. About 33 percent of Provoans are Broadweave customers.
Provo relies on Broadweave's payment to make the city's monthly payment on the bond that funded construction of the network. The city paid the November bill by withdrawing money from a security deposit Broadweave made at the time of the sale.
Technically, Broadweave could miss 18 monthly payments in a row before defaulting, but Christensen said that won't happen. Instead, he said cash flow has improved enough to cover operating expenses and soon will be good enough to cover the monthly payments.
The city council responded favorably to the presentation. Council co-chairman George Stewart said he would have done the same thing Broadweave did to maintain cash reserves. "It's in Provo's best interest that you not use your cash that would jeopardize your business and your growth," he said.
City Councilwoman Sherrie Hall Everett wanted to know how much longer Broadweave might rely on its security deposit and letters of credit, which total $6 million.
Broadweave board chairman Dave Moon said the strategy might end this month. "We don't want to give the impression that it was our intention to use the security deposit or that we wanted to do it," he said.
Christensen said the company's board will decide soon whether to make the December payment, which was due Monday. A grace period extended the due date to the 25th. He said it is in Broadweave's best interest not to use the security deposit.
Broadweave cut expenses dramatically by streamlining customer service.
Christensen called the customer databases turned over to Broadweave atrocious. The company recently completed the transition of all customer information to its system and now plans to further trim costs with automation software.
E-mail: twalch@desnews.com
