Lumen Technologies Inc (LUMN) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to CenturyTel's third-quarter 2007 earnings conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session and instructions will be given at that time.

(OPERATOR INSTRUCTIONS) As a reminder this conference call is being recorded.

I would like to turn the conference over to Mr.

Tony Davis, Vice President of Investor Relations.

Mr.

Davis, you may begin.

Thank you.

Good morning, everyone and welcome to our call today to discuss CenturyTel third-quarter 2007 earnings results released earlier this morning.

During today's call we will refer to certain non-GAAP financial measures.

We've reconciled this measures to GAAP figures in our earnings release which is available on our web site, www.centurytel.com.

Your host for today's call is Glen Post, Chairman and Chief Executive Officer of CenturyTel.

Joining Glen and I on our call is Stewart Ewing, CenturyTel's Executive Vice President and Chief Financial Officer.

Also available during the call today is Karen Puckett, CenturyTel's President and Chief Operating Officer.

We will be making certain forward-looking statements today, particularly as they pertain to guidance for fourth-quarter and full-year 2007.

selected information regarding 2007 and 2008 and other outlooks in our business.

Please review our Safe Harbor language found in our press release and our SEC filings which describe factors that could cause our actual results to differ materially from those projected by us in our forward-looking statements.

Our call will be accessible for telephone replay through November 7, 2007 and accessible for webcast replay through November 21, 2007.

For anyone listening to a taped or webcast replay of this call or for anyone reviewing a written transcript of today's call is noted that all information is presented current as of only November 1, 2007 and should be considered valid only as of this date regardless of the date listened to or reviewed.

At this time, I would turn the call over to your host today, Glen Post.

Glen?

Thank you, Tony.

We appreciate you joining us today as we discuss CenturyTel's third-quarter 2007 operating results and guidance for the fourth-quarter and full-year 2007.

A diluted earnings per share excluding nonrecurring items was $0.97 for the quarter or $0.05 ahead of the upper end of our previous guidance and $0.08 ahead of first call consensus of $0.89.

Operating revenue excluding non-recurring items for the quarter was $708.3 million which is higher than the upper end of our previous guidance.

The increase on the third quarter was driven by $49 million of revenues contributed by the Madison River properties reported $42 million of revenue related to the recognition of revenue settlements during the -- during the quarter.

The revenue increase over anticipated levels is primarily driven by higher access revenue due to higher usage than expected and higher long distance and DSL revenues than anticipated.

We experienced strong data revenue growth during the quarter of more than 47% year-over-year.

This increase was driven by the addition of more than 130,000 high-speed Internet subscribers during the last 12 months, the acquisition of Madison River properties and data revenues associated with the revenue settlements.

Including the Madison River properties but excluding the data revenues associated with the revenue settlements, data revenues increased more than 28% year-over-year.

These revenue increases were more than offset by anticipated revenue declines, attributable to access declines and lower access revenues along with lower revenues associated with changes to terms of DBS agreement effective January 1st, 2007.

We also generated a strong free cash flow of $167.3 million during the quarter as our management and employees continue to focus on controlling costs in our business which, obviously, remains important to our success.

We experienced taxes time losses of approximately $34,400 during the quarter which equates to a normalized loss of 5.4%.

Our legacy markets experienced taxes time losses of about $32,000 compared to about $29,000 last quarter.

Demand for broadband services remain solid as we added more than 29,000 high-speed Internet customers during the third quarter.

This represents a 5.8% sequential growth and broadband customers during the third quarter.

Also, organic broadband customer growth for the past 12 months was nearly 39%.

We continue to position ourselves as a broadband provider of choice in the marketplace as we introduced our pure broadband products recently targeting wireless consumers that use wireless as their primary service.

We believe broadband is crucial in helping to stabilize losses as 85% of our ports to cable companies do not have broadband service.

From an overall bundle standpoint, more than 33% of residential customers in our Legacy CenturyTel properties are served through one of our bundle offerings up from a little over 27% a year ago.

We also improved our sales in third quarter on our digital satellite product driven by our focused triple play bundle, positioning and promotion strategy.

We are working to continue to increase sales in the products and the months ahead.

We serve more than 46,000 satellite TV subscribers, which includes over 8,000 added during the third quarter.

Also, we are very focused on customer acquisition and retention within our local markets.

We continue to expand our consumer distribution capabilities encouraged with our results to date.

Before turning the call over to Stewart, I want to briefly comment on a couple of other items.

First, as you know, we completed the acquisition of Madison River on April 30th.

The integration of the properties into CenturyTel's operations is well under way with all systems converted except for provisioning and billing.

We expect to complete the final conversion in the second quarter 2008.

We continue to expect approximately $17 million in net synergies along additional incremental cost savings over time.

Second, we purchased nearly 800,000 share of common stocks for approximately $36 million during the quarter under our new $750 million re-purchase program authorized by the Board in August of this year.

With that, I will turn the call over to Stewart to provide additional details on our results in the fourth quarter and to update you on our financial guidance for 2007 Stu?

Thank you, Glen.

During the next few minutes I will cover some of the highlights of our third-quarter 2007 operating results and spend a few minutes discussing CenturyTel's capital structure and liquidity.

I will conclude my comments this morning with a discussion of 4th quarter and full-year 2007 guidance provided in our earnings release issued earlier today along with a few items related to 2008.

As a reminder, all of our comments regarding actual results for third-quarter 2007 and 2006 exclude those non-recurring items detailed on the financial statements accompanying the press release.

For third-quarter 2007, operating revenues increased 14.4% to $708.3 million from $619.2 million in third-quarter 2006.

This increase was primarily due to the $49 million revenues contributed by the Madison River properties and the $42 million of revenues settlements recognized during the third quarter.

Excluding those two items, operating revenues declined slightly or a little less than $2 million year-over-year.

Voice revenues for third-quarter 2007 were $229.9 million versus $218.7 million in the third quarter a year ago.

This 5.1% increase in voice revenues was primarily driven by voice revenues from the Madison River properties and growth in long distance revenues which more than offset revenue declines associated with lower access lines.

Network access revenues were $248 million versus $219.3 million in third-quarter 2006.

This increase of nearly $29 million was primarily driven by the revenue settlements recorded during the quarter along with network access revenues contributed by the Madison River properties which more than offset revenue declines associated with lower intra-state minutes of use and lower interstate revenue requirements as a result of lower operating expenses and a decline in our net plan investment.

Data revenues increased 47.3% from 91.4 million in third-quarter 2006 to $134.6 million in third-quarter 2007.

Primarily driven by the recognition of revenue settlements discussed above which was a little less than $17 million, strong high-speed Internet customer growth during the last 12 months, and the data revenues contributed by the Madison River properties that more than offset revenue declines associated with lower dial-up internet revenues and special access revenues.

Fiber transport and CLEC revenues increased 11.5% to $41.8 million in third-quarter 2007 from $37.5 million in the third quarter a year ago due to growth in our fiber transport business and revenues from the acquired properties.

Other revenues were $54 million compared to $52.3 million in third quarter 2006.

This increase was primarily driven by revenues contributed by the Madison River properties that more than offset lower satellite video revenue due to the change in the terms of our satellite television agreement effective the first of 2007.

Operating expenses increased 7.7% from $447.6 million in third-quarter 2006 to $481.9 million in the third quarter of this year.

This increase in operating expenses was primarily driven by the acquisition of the Madison River properties and growth in high-speed internet customers, which more than offset lower personnel-related costs, lower depreciation expenses associated with fully depreciated assets and lower satellite video expenses due to the change in the terms of our DBS agreement effective January 1, 2007.

For third-quarter 2007, we generated an operating cash flow margin of 51.2% compared to the 48.7% in third quarter 2006.

Operating income for third-quarter 2007 was $226.4 million, a 32% improvement over third-quarter 2006 operating income of approximately $171.5 million.

This increase was primarily due to the revenue settlements recognized during the quarter and the incremental operating income contribution from the Madison River properties.

Net income for the quarter rose nearly 39% to $108.1 million compared to $77.9 million in the third quarter of 2006.

We added more than 29,000 high-speed Internet customers during the quarter and we ended the quarter at 530,000 high-speed Internet customers or a little over 29% penetration of our DSL-enabled lines.

Concerning our capital structure as of September 30, CenturyTel's debt-to-equity ratio was 0.9:1 and net debt to annualized third quarter 2007 operating cash flow was 2.2 times.

If you exclude the $42 million of revenue settlements that we recognize in the quarter, net debt to operating cash flow was 2.3 times.

As of June 30, 2007, these ratios were 1:1 and 2.6 times respectively.

During the quarter, CenturyTel announced a call for the redemption of its Series K 4.75% convertible senior debentures.

The redemption was completed on August 14.

Withholders of approximately $150 million of the debentures electing conversion to our equity and approximately $15 million electing redemption.

We continue to expect year-end 2007 net debt to operating cash flow to be in the range of 2.2 to 2.4 times.

So, CenturyTel continues to maintain a solid balance sheet and is in great shape financially.

Additionally, we believe our strong cash flows and excellent liquidity position us to take advantage of opportunities and meet challenges that may arise in the future.

Finally, I would like to discuss fourth-quarter and full-year 2007 guidance provided in our press release this morning.

Let me begin by reminding you that our guidance excludes any non-recurring items that may occur in the fourth quarter of this year.

We also expect the Madison River properties, excluding one-time severance and integration cost, to be accreted to free cash flow and break even to slightly accrete to diluted earnings per share for 2007.

Finally, fourth-quarter and full-year 2007 guidance are based on basic shares outstanding as of the end of October of 2007, which reflects all shares re-purchased pursuant to our $1 billion share re-purchase program that was completed in June and our new $750 million repurchase program announced in late August.

For fourth-quarter 2007, we anticipate revenues in the range of $645 to $655 million.

We expect diluted earnings per share for fourth quarter to be in the range of $0.66 to $0.71.

This decrease from third quarter is primarily due to the $42 million of revenue settlements related to trial periods which positively impacted third-quarter earnings by $0.23 which, of course, will not re-occur in the fourth quarter.

For full year 2007, we expect diluted earnings per share to be in the $3 to $3.05 range, a narrowing and an increase over our previous full-year 2007 diluted earnings per share guidance of $2.90 to $3.

The increase primarily due to third-quarter actual results exceeding our expectations.

From a capital expenditure standpoint, we continue to expect full-year 2007 capital expenditures to be in the $320 million to $325 million range including the Madison River properties.

Finally, I would like to briefly discuss a couple of items related to 2008 that will hopefully assist you in updating your models for 2008 since First Call estimates currently reflect a 2008 diluted earnings per share range of $2.69 to $3.16.

First, our revenue settlements related to prior periods are anticipated to decline and negatively impact 2008 diluted earnings per share by $0.22 to $0.24.

This really relates to the items that we booked in the third quarter.

We also expect Universal Service Fund receipts to decline and negatively impact 2008 diluted earnings per share by $0.08 to $0.10 per share.

This decline is primarily driven by decreased depreciation expense due to lower capital investment and fully depreciated assets and expected increase in the national average cost per loop to approximately $363 and the phase out of the safety net supports that we received for five years on properties acquired from Verizon in 2002.

We will further discuss full-year 2008 guidance on the fourth-quarter earnings call in February of 2008.

That concludes my prepared remarks for today.

At this time, the operator will provide further instructions for our question and answer portion of our call.

(OPERATOR INSTRUCTIONS) First question comes from Michael McCormack from Bear Stearns.

Hi, guys.

How is it going?

Fine.

Just looking into some of the impacts in 2008, and I know we are not giving guidance here, but if you are, sort of, looking at a year-over-year impact from access line lost as well as USF and access revenue pressures, is there anything to be thinking about that '08 would be different than '07 or the same kind of impacts we have seen historically?

Mike, I don't know of any real changes here.

We do see in the markets where -- we see a combination rolling out within the last six months, we are losing lines there.

Competition has -- of the line loss increases there.

We have had competition, a voice competition in markets more than six months.

We are seeing those losses decline pretty significantly.

So, we will see some initial hits as voiceover IP continues to roll out in certain markets.

But once they are in place for six months or so, we are turning that around and see the losses and decline.

We are in the 32% to 37% range as far as our voiceover IP competition today and I think we can see that go up maybe to the 45% range over the next 12 to 18 months.

So we'll see that continue to hit us some, but I don't see any major catalyst for change here.

Okay.

Just lastly on housing, have you guys seen any impact at all from the housing weakness?

Not really, no.

The housing weakness has not impacted us in our markets.

Great, thanks, guys.

Our next question comes from Jonathan Chaplin from JP Morgan Securities.

Just two quick questions, if I may.

On the reduction in USF receipts, it sounded like the entire 8% to 10% reduction you are looking at there is really driven by -- is -- you are not factoring in the -- the impact of lower access lines.

It sounds like it is really just driven by the loss of -- the increase in the average cost per loop and the loss of the -- the safety net support.

I just wanted to make sure that was the case.

If it is not a case, how much of an access line loss you are factoring into that?

And then, it looks like your voice ARPU was up in the quarter fairly -- fairly decently.

And I am wondering what the driver might be there.

Thanks.

Jonathan, with respect to the reduction in universal service, it is really driven by the -- by the NACPL which, I guess, we have expected to increase somewhat next year, and the fact that our depreciation expense, you know, is lower and our lower capital investment is lower.

So, that is really what is triggering that.

It really doesn't have anything to do with the loss of access lines.

The only place where we received some USF on access line basis is in Texas.

And it is -- it is not that significant.

Jonathan, regarding the voice ARPU.

A couple of things.

First of all, the -- the usage -- the access usage especially is up.

Revenue is up.

And you combine that with access line losses of course and drives that ARPU up and then you have got the Madison River properties in there fully this quarter.

So, all that combined are impacting the ARPU some.

Okay.

I think in your comments -- I am not sure I got this right but sounded like special access was down, it was one of the sources of pressure.

Did I hear that correctly?

And if so, what is driving the decline in special access?

Thanks.

It is down slightly, down, we did make that comment .

It is down by a couple of

Just a couple million dollars.

Just a couple million dollars.

Jon.

I would have thought -- [ Inaudible ]

Hello?

-- Jonathan we didn't catch that.

I just would have expected that to be a revenue stream that was growing.

It seems to be growing in other markets largely driven by demand from wireless providers.

And a little bit of -- of enterprise growth.

Yes.

You know I think in our markets, we have seen -- I mean, we have seen some decline, we have seen some grooming of networks.

Mostly it's what we have seen, possibly some use of the Internet.

Great, thank you very much.

Our next question comes from Gray Jabely from UBS.

Alright, thanks.

Good morning, guys.

Just a couple of questions.

First thing' the fourth-quarter guidance.

If I back out the $42 million one-time revenue settlement this quarter, looks like you are guiding to $10 million to $20 million sequential drop in revenues.

It seems to be higher than recent trends.

Just wondering if you are being conservative or is there something we should be watching out for?

And then second, just from a housekeeping perspective, Karen, if you could just give the quarterly detail on the financial losses between residential and business, that will be great.

Thank you.

With respect to the revenue, you are correct.

But really it's -- it is just a typical decline that we generally see in the fourth quarter because usage is generally down somewhat in the fourth quarter.

Also, our expenses will be down somewhat in the fourth quarter and that impacts our revenue as well since we are ready to return to regulated on the interstate jurisdiction.

So, a combination of expected usage declines and expense reductions and that effect on revenue, as well as the -- you know continued access line declines that we would expect in fourth quarter.

Okay.

Thank you.

Our next question --

Wait a minute, I've got the access line follow-up here.

This is Karen Puckett.

On CenturyTel Legacy with the loss of $32,400.

That is a 10.7% increase quarter over quarter, the quarter 3 last year.

And really very consistent to what we have been seeing.

75% was the residential primary, 13% second line, and 12% some business losses.

Key issue still is inwards on the primary side of the house.

That declined year-over-year about 8.7%; however; our primary out has -- are still improving, the decline is improving.

That was about 5.6% year-over-year.

And as Glen said, we have had -- really our exchange has had VOIP competition, has doubled year-over-year, and the majority of all of our losses in acceleration, year-over-year, is coming from those newly launched VOIP exchanges.

The markets where we have had competition for more than six months we are seeing improvements.

So, we are encouraged by that.

Our port numbers out, as a percent of our total out, is hanging still at 7%.

Those ports include cable, -- and wireless.

There are consistencies still in that category, too.

Okay.

Thank you.

If I could just follow up on -- would you just give us a breakout between net add and the quarter between the Madison River properties and the Legacy CenturyTel.

The net adds for Madison River properties for $500 million and the Legacy was $28.5 million.

Approximately.

Nice year-over-year growth.

Okay.

Thank you.

Our next question comes from Frank Louthan from Raymond James.

Great.

Maybe, Karen, back to the line trends and to Mike's question on the housing.

If you have seen slowdowns in housing, has that helped any of your trends?

You say -- maybe seeing the inbound still down.

Do you think that is helping your outbound at all?

Were there any areas where you may have been impacted by some exclusive agreements with cable companies that the SEC change might help as well?

Then, if you could comment a little bit on the data trends.

You look -- clearly grew the revenue there a little bit more than we were expecting but didn't seem to translate to as much incremental EBITDA.

Are you seeing some more -- is this incrementally less profitable data you are that you are taking on and give us an idea where is that coming from, the Madison River side or some new business?

Thanks.

On -- on the access line -- you know, the housing -- we are seeing housing starts slow down.

But in terms of foreclosure and stuff, I can't say that it has cycled through on us yet.

We think the FCC ruling yesterday is positive from our standpoint, because it allows us now to get into some MDUs that the cables have consistently had exclusivity.

I think it is about 24% of our households really are MDUs and that is an upside opportunity for us.

And in terms of data revenue, you know, we have been pretty consistent with the same promotion that we have been running for almost 12 months.

And I don't think, from an EBITDA standpoint, that's been any less there.

I think it was the PTAs there that maybe --

You know,Frank, there was about $17 million of the $42 million one-time adjustment that we had in the third quarter was booked as part of the data revenue line.

Okay.

Great.

That's helpful.

Thank you.

Our next question comes from Simon Flannery from Morgan Stanley.

Thank you.

Good morning.

Housekeeping, first of all.

You noted that you would be including repurchases up to October.

Can you help us with what you have bought this month or last month?

And secondly, Glen, any color you can provide on the M&A opportunities out there right now?

Thanks.

Simon, we don't disclose the purchases except at the end of the quarter.

So we don't disclose that number today.

Regarding M&A, I think things are pretty quiet right now.

With the deal with Verizon and AT&T just getting settled with their merger and all.

It is not a lot -- there is always a lot of talk, but we don't see anything major happening at least in the near term here.

There are always possibilities.

So, we are still very interested and would be pursuing acquisitions that fit our strategy at the right price and can drive shareholder value but nothing major on the rise that we see right now.

Okay.

Thank you.

Our next question comes from David Barden from Bank of America.

Thanks, guys.

Sorry.

Just a couple of questions if I could.

Number one -- I apologize if I missed this earlier.

The Cap Ex looked obviously up sequentially but looks like on track to be, you know, maybe down year-over-year, and I just wanted to kind of get a sense of where you guys were looking at fourth-quarter Cap Ex coming in and the picture for the year and any comments you can give us on the priorities for next year.

And then second, I guess at the analyst day, we talked about November 1 being a potential target for the Federal State Joint Board coming in with incremental recommendations on USF reform, et cetera and wanted to see if you guys had any flavor for where we are in that process and what, if anything, you think might be coming out of it.?

Thank you very much.

Yes.

On Cap Ex, we expect to hit pretty close to our target of $325 million.

The fourth quarter will be a big quarter for us.

Primarily, focused on expanding our broadband capabilities, expanding DSL opportunities, and taking fiber a little deeper in a number of markets, expanding our fiber network.

So, we will see a lot of that come in in the fourth quarter.

Next year really the focus will be on broadband.

It will be on expanding our video capabilities as well as taking, you know, higher speed data to a lot of our markets.

What is really the focus is broadband.

And we expect about the same level of Cap Ex next year in the $325 million range.

That is $141 million.

I mean, that is a big number relative to a number you have spent in the past.

Is it really -- you going to spent or it's going to spill into next year?

We think it's going to be spent.

We have had that discussion recently.

We expect that money to be-- close to $141 million going to be spent.

Normally, the fourth quarter is higher, in the $100 million range.

This time a $140 million that we expect to be spending in the fourth quarter.

Okay.

Concerning the Federal State Joint Board recommendation of USF.

We haven't seen anything at this point.

I mean, we still expect them to come out with something, you know, fairly soon because there was a deadline that was imposed there.

I guess we are, you know, positive with respect to the -- to the caps that they have included, that the FCC has included on the Alltel acquisition or Go Private transaction and the AT&T acquisition recently.

But we will just see -- you know see what they come up with.

And you guys are -- do you think it is today or heard that it might have been pushed back or any sense of what is going on?

We don't really -- we don't really know.

We heard talk of maybe pushing back a little bit but we are not sure.

Okay, thanks, guys.

Our next question comes from Michael Rollins from Citigroup.

Hi, good morning.

Good morning.

Just wondering if you guys could talk about in the markets themselves, the local markets.

What is the disparity of DSL penetration rates that you see?

And, rather than talking about the next six or twelve months, can you talk about it on a three or four-year view how penetrated you think your DSL can get in terms of using local markets that may be ahead or behind the curve as examples.

I'm Karen Puckett.

You know, I would say that in the last six months, there has been maybe an increase in just the promotion, dollars going to DSL from or broadband from the cable competitors.

But the standard rates have been very consistent.

The same thing on the triple play.

They are putting the focus on the promotional side and what we are seeing there is basically an 88, 89 category which is what we have in the market too.

In terms of -- in terms of the -- that was on a -- so that's what is happening on a price point.

In terms of the DSL penetration, I don't think we really talk by market with DSL penetration rates or, if I understand that question.

How much more DSL penetration opportunity.

We feel like we have good growth in '07.

We expect good growth in '08 but will be declining just where we are on the penetration side and the fact that there is a level of people who don't have a PC.

I think the real push going forward is to getting more bandwidth out there.

The can he manned more -- demand for bandwidth will grow exponentially and we are working to broaden our ability to bring really high-speed data to a larger percentage of our customers.

So, that is really going to be our focus in the next couple of years and I think there will be revenue opportunities as demand for broadband grows significantly.

All right.

Thank you very much

Our next question comes from Patrick Ryan from Lehman Brothers.

Good morning, guys.

Thanks for taking the call.

Just a quick couple of questions on IPTV.

I just want to get an quick update on the cross in Columbia, first.

And then, second, I was wondering in terms of that Cap Ex spending in the fourth quarter, how much of that is, maybe,.

dedicated to pushing IPTV in other markets?

And with AT&T ramping on their business, are you guys seen any, sort of, to combines in equipment pricing.

Finally can you discuss your recent -- I think last week you launched this broadband TV initiative that is available to subscribers about 1 to 5 MEG.

I was just wondering what percentage -- and what kind of feedback are you getting on that product?

Thanks.

Yes, Patrick, first of all on the spending for IPTV, it is in the $10 million range of the fourth quarter.

Of the $120 million, about $10 million will be on the video product.

As far as an update on Lacrosse, the average penetration after one year we are seeing 15% penetration.

We will be opening up additional footprint in that market to about .

to 70% of market coverage by year end.

We are migrating to MPeg 4 up there.

We are using our Colombia head-in to feed Lacrosse now.

We also as product gaps are filling in.

We don't have DDVR capability up there.

We hope to have that and HDTV in 2008 -- by 2008.

Again, the technology we are using is ADSL2+ and we getting about 15 megabits out to 6,000 or 7,000 people there.

In Colombia, we are utilizing BBSL technology.

Same vendors that AT&T is using.

We launched there in October.

We are seeing good addition of 40 customers to 50 customers a week.

We pass today about 15,000 homes.

Expect to pass about 27,000 by year end and eventually over 30,000 homes in the Colombia market.

We are able to provide 25 megabits up to 5500 feet.

5500 feet in the market.

We are getting four streams of television -- and a DVR product.

The DVR product is really a very good product.

We can record up to four streams at a time.

Our pricing is competitive with cable TV.

And we expect to have about 70%, 75% of the market covered, of the homes, by year end.

Again we are using M peg 4 encoding and we have seen improvements in the HDTV and switch digital compression technology.

We are at at 6 to 8 megabits which is required today and we think we can go down in the 4 megabit range for HDTV in the 2008 time frame.

So, we are seeing a lot of improvement that could help our ability to help the high speed a little further down

Actually in terms of equipment pricing, are you seeing any reduction there with AT&T ramping up?

We are seeing some reductions.

We are anticipating more in 2008, but we are beginning to see some reductions, no questions there.

And all the way across the spectrum of those products.

Great.

And then one last more.

This is just maybe discuss that broadband TV product you just launched?

I would say that we are still encouraged.

It is too early to talk about subscribers and take rates but we will keep you updated.

We did add incremental functionality.

We now have video on demand capability also.

So, in the next couple of quarters we will give more color on that.

Great.

Thanks a lot, guys.

Again, ladies and gentlemen, if you have a question at this time press the 1 key on your touch-tone telephone.

Our next question comes from Chris King from Stifel Nicolaus.

Good morning, guys.

Just a couple of quick questions for you.

One, just wanted to follow up real quickly on the previous M&A question.

Obviously, Fair Point has had at least some minor issues with getting the Verizon acquisition closed.

I was just wondering, without getting too specific, what your thoughts were on that?

Whether that changes the way that you would look at future M&A opportunities given the struggles that they seem to be running into with trying to pick up those RBOK lines.

Second of all, Karen, was wondering if you can provide a quick update on whether there has been any movement at all on the phantom traffic issue.

And thirdly, just wanted to try one more question, I guess, on your share re-purchase program.

Sprint Nextel mentioned this morning they are slowing down.

They are certainly a bit more conservative on their share re-purchase program given the economic uncertainty that is out there.

I was wondering if you think about that when you decide the specific timing of your share re-purchase program.

Thanks.

The Fair Point issue do not affect how we look at acquisitions.

M&A spectrum or opportunities there.

I think these issues are fairly specific to -- to this transaction and we don't expect that it will impact us significantly in the future.

On the phantom traffic, we haven't seen any movement from Martin.

He certainly talks about it, but we are still encouraged.

We have picked up discussions with all of our peers and Verizon and AT&T.

So we are encouraged about that.

We do believe that we are out there advocating this, and hopefully the sooner or later we will see some movement on it.

And Chris, on the share re-purchase, no, we are not altering our plans on the share re-purchase at all.

We have a matrix set up with a 10B5-1 plan with our broker and we are, basically, purchasing shares every day.

We are or not going to -- you know our plans now are not to change what we are doing.

Thank you.

Our final question for today comes from Nicole Black from Wachovia Securities.

Hi, guys.

You had given guidance earlier this year for access line losses of, kind of a, negative 4.5% to 6% rate excluding Madison River.

We are certainly tracking in that range.

I was just wondering, with your focus on broadband and probably bundling, does that range look about the same for '08 or better?

We think that range is pretty much in line for '08, Nicole.

Yes, we are actually up there to debt of 5% to 6% in the third quarter 10- Q and we haven't given guidance in '08 at this point but at this point, I mean, Glen earlier talked about the increase that we expect to see -- continued increase next year with more competition and we will just see how fast that comes along and what that does to access losses but nothing significantly different at this point.

Great, Thank you.

This concludes our question-and-answer section today.

I would now like to turn the conference back over to Glen Post for any closing remarks.

Thank you.

In closing, I think you can tell we've achieved solid financial results for the third quarter and for the first nine months of the year.

We remain committed to delivering high value product and services to our customers with the real focus on improving customer retention and expanding our market share.

We also remain committed to utilizing our strong cash flow to drive shareholder value over the long term.

We appreciate your participation in our call today and we look forward to speaking with you in the weeks and months ahead.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes our program for today and you may all disconnect and have a nice day.

Thank you.