XO Communications 2009 Annual Report Download - page 41

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Revenue — 2009 Compared to 2008
Total revenue for 2009 increased 3% compared to the prior year. We experienced strong growth in our core
service offerings relating to Broadband Services. For 2010, we anticipate continued revenue growth. Based on
continued investments which leverage next-generation IP-based technologies, we expect revenue from Legacy/
TDM services, as a percentage of our total revenue, will continue to decline during 2010 as our sales continue
to be focused on next-generation IP-based solutions. The projections for 2010 will be sensitive to influences in
a challenging macro-economic environment and regulatory climate changes.
Revenue was earned from services provided in the following categories for the years ended December 31
(dollars in thousands):
2009
%of
Revenue 2008
%of
Revenue Dollars Percent
Change
Core services
Broadband . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 798,349 52.5% $ 670,616 45.4% $127,733 19.0%
Integrated/Voice. . . . . . . . . . . . . . . . . . . . . . . . . . 271,818 17.9% 317,423 21.5% (45,605) (14.4)%
Total core services . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,167 70.3% 988,039 66.9% 82,128 8.3%
Legacy/TDM services . . . . . . . . . . . . . . . . . . . . . . . 451,121 29.7% 489,571 33.1% (38,450) (7.9)%
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,521,288 100.0% $1,477,610 100.0% $ 43,678 3.0%
Core Services. For the year, Core Services increased $82.1 million, or 8.3%, as compared to 2008 reported
results. Within Core Service, Broadband Services grew $127.7 million, or 19.0% as compared to 2008 reported
results. Broadband Services contains strategically important products which are deployed largely using
IP-enabled technologies as well as other strategic data transmission and internet services.
Contributing to the growth in Broadband Services were the IP-based products and services which increased
$73.6 million, or 49.5%. As one of the relatively mature and more established products of the IP suite, IP Flex
increased $21.6 million, or 22.2%, year-over-year, and it continues to show solid sequential growth. IP VPN in
its second full year increased $29.4 million, or 158.8%, as compared to 2008. We expect that the IP-based
services will continue to be central to revenue growth in 2010 and beyond.
Also important to Broadband Services growth are the data and internet products which grew $24.7 million, or
7.5%, and $29.5 million, or 15.2%, respectively. Dedicated Private Line, the largest component of Data
Services, increased $19.2 million, or 6.9%. Investments in our long haul network continue to support the
growth of Dedicated Private Line. Ethernet increased $12.6 million, or 36.7%, year-over-year supported by
continued strong demand for Ethernet-Over-Copper (EoC) which utilizes existing telephony infrastructure to
deliver high-speed IP connectivity at a competitive value. Low cost access utilizing EoC also supported growth
in Dedicated Internet Access (DIA) of $16.9 million, or 10.6%.
Offsetting some of the growth in Broadband, Integrated/Voice Services reduced $45.6 million, or 14.4%, as
compared to 2008 reported results. These products include traditional Carrier Long Distance Termination
(CLDT) and older integrated offerings which are not IP-enabled. Customers continue to migrate away from
these products to IP-enabled offerings which offer more flexibility and better value.
Legacy/TDM Services. In 2009 revenue from Legacy/TDM Services decreased $38.5 million, or 7.9%, as
compared to 2008. Though XO continues to offer and service these products and services, they are largely
based upon traditional dial modality (TDM) which is not a significant focus of marketing efforts.
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