FairPoint Communications 2003 Annual Report Download - page 3

communities we serve, with limited competition. Demand for telephone services from our residential and local business
customers has historically been very stable despite changing economic conditions. As a result, we have experienced a
relatively stable access line count during the last two years compared to regional bell operating companies, or RBOCs.
Additionally, our telephone companies operate in generally supportive regulatory environments. These factors have permitted
us to generate consistent cash flows and strong margins.
•. We currently operate 26 RLECs in 17 states clustered in five regions, enabling us to
capitalize on economies of scale and operating efficiencies. Our geographic diversity significantly enhances our cash flow
stability by limiting our exposure to competition, local economic downturns and state regulatory changes. In addition, we
believe that we have achieved significant scale efficiencies by centralizing many functions, such as marketing, network
planning, accounting and customer service.
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• Our advanced network infrastructure enables us to provide a wide array of
communications services. Our network consists of central office hosts and remote sites with all digital switches, primarily
manufactured by Nortel and Siemens, operating with current software. As of December 31, 2003, we maintained over 24,000
miles of copper plant and approximately 2,800 miles of fiber optic plant in order to service our 264,300 access line equivalents.
As a result of our historic capital investments, our network infrastructure requires predictable capital expenditures and allows
us to implement certain broadband enabled services with minimal incremental cost. As of December 31, 2003, approximately
86% of our exchanges are capable of providing DSL services.
• We believe that, as a result of our advanced network and switching
infrastructure, we offer the only comprehensive suite of communications services in our markets, including local voice, long
distance, data and Internet services. In addition, we offer enhanced features such as caller identification, call waiting, call
forwarding, teleconferencing, video conferencing and voicemail. We also offer broadband communications solutions to most of
our customers primarily through DSL technology.
• We have an experienced management team that has demonstrated its ability
to grow our rural telephone business over the past decade. Our senior management team has an average of 21 years of
experience working with a variety of telephone companies. Our regional presidents have an average of 29 years of experience
in the telecommunications industry. Our management team has successfully integrated 30 business acquisitions since 1993,
improving revenues and cash flow significantly while enhancing service quality and broadening service offerings.
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The key elements of our strategy are to:
• We have achieved significant operating efficiencies by
applying our operational, regulatory, marketing and management expertise to our acquired businesses. We intend to continue
to increase our operating efficiencies by consolidating various administrative functions and implementing best practices across
all of our regions. For example, we have begun to integrate all billing systems into a single, outsourced billing platform, which
will allow us to improve our customer service and enhance sales and marketing efforts. When completed, we plan to use this
platform to develop regional customer service and call centers and to create a significantly improved customer data base. These
call centers and customer data base will allow us to enhance our operating efficiency and optimize our marketing initiatives.
The billing platform will also enable our customers to directly access, via the Internet, their accounts and will allow us to
provide virtual call centers.
• We are focused on increasing our revenues by introducing innovative product offerings and
marketing strategies for enhanced and ancillary services to meet the growing needs of our customers. Our long standing
relationships with our customers have helped us to successfully cross-sell broadband and value-added services, such as DSL,
long distance, Internet dial-up, voicemail and other services. We will continue to evaluate and implement technologies that will
allow us to offer new products and services.
• We believe that our service driven customer relationships and long-standing local presence lead
to high levels of customer satisfaction and increased demand for enhanced and ancillary services. We continue to build long-
term relationships with our customers by actively participating in the communities we serve and by offering an array of
communications services and quality customer care.
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• We believe that our acquisition strategy has been successful because of our ability to
integrate acquisitions and improve operating efficiencies in the businesses we acquire. Our management team has
consistently produced strong operating cash flow improvements in our acquired businesses. We continue to evaluate and
pursue acquisitions which provide the opportunity to enhance revenues and cash flows. Given these objectives, we believe
that such acquisitions will be primarily in regions where we already operate.