Earthlink 2005 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2005 Earthlink annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 113

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113

and $114.3 million in cash, including cash to be used to satisfy certain liabilities. The completion of the acquisition is subject to regulatory
approvals and closing conditions.
Marketing Alliances
We have a marketing relationship with Sprint Nextel Corporation (“Sprint”) which provides that EarthLink is the wholesale high-speed
ISP for Sprint’s local residential and small business customers. In addition, we provide Sprint with wholesale narrowband access services. The
contracts associated with these arrangements expire in 2007. During the years ended December 31, 2003, 2004 and 2005, our relationship with
Sprint generated more than 10% of our total gross organic subscriber additions. Our arrangement with Sprint is not exclusive, and Sprint may
pursue relationships with other ISPs.
We have a marketing relationship with Dell Inc. (“Dell”).
During the years ended December 31, 2004 and 2005, our relationship with Dell
generated more than 5% of our total gross organic subscriber additions. Our marketing relationship with Dell extends through June 2006. Our
marketing relationship is not exclusive, and Dell may pursue relationships with other ISPs.
Key Operating Metrics
We utilize certain non-
financial and operating measures to assess our financial performance. Terms such as churn and average revenue per
user (“ARPU”)
are terms commonly used in our industry. The following table sets forth subscriber and operating data for the periods indicated:
37
As of December 31,
2003
2004
2005
Subscriber Data (a)
Narrowband subscribers
3,984,000
3,880,000
3,580,000
Broadband subscribers
1,061,000
1,364,000
1,608,000
Web hosting accounts
161,000
144,000
127,000
Total subscribers at end of year
5,206,000
5,388,000
5,315,000
Year Ended December 31,
2003
2004
2005
Subscriber Activity
Subscribers at beginning of year
4,987,000
5,206,000
5,388,000
Gross organic subscriber additions
2,706,000
3,137,000
2,766,000
Acquired subscribers
76,000
12,000
147,000
Adjustment (b)
(152,000
)
—
(
27,000
)
Churn
(2,411,000
)
(2,967,000
)
(2,959,000
)
Subscribers at end of year
5,206,000
5,388,000
5,315,000
Churn rate (c)
4.0%
4.6%
4.6%
Narrowband Data
Average subscribers (d)
3,930,000
3,965,000
3,726,000
Service ARPU (e)
$
19.70
$
18.21
$
16.58
Churn rate (c)
4.6%
5.3%
5.5%
Broadband Data
Average subscribers (d)
931,000
1,215,000
1,495,000
ARPU (f)
$
32.31
$
28.77
$
24.62
Churn rate (c)
1.7%
2.5%
2.6%
Web Hosting Data
Average accounts (d)
166,000
153,000
136,000
ARPU (f)
$
25.01
$
25.84
$
24.97
Churn rate (c)
2.8%
2.4%
2.2%