Innovate Corp (VATE) 2011 Q1 法說會逐字稿

Welcome to the PTGi first-quarter 2011 conference call. At this time all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session.

(Operator Instructions).

As a reminder, this conference is being recorded, May 17, 2011. Thank you. I will now turn the conference over to Richard Ramlall, Chief Communications Officer.

Thank you, operator. And good morning, ladies and gentlemen. With me today on the call are Peter Aquino, Chairman, President, and Chief Executive Officer; and Jim Keeley, Interim Chief Financial Officer and Treasurer. This call is being webcast with an accompanying slide presentation that can be accessed in the Investor Relations section of our website, at Investors.PTGi.com on the main investor overview page. Once have you registered for the webcast, a PDF version of the slides will be available for download through that link.

Please note that all the financial information that we are presenting today reflects the impact of the discontinuation of Primus' European retail operations in all periods; as well as the acquisition of Arbinet, which was completed on February 20, 2011, and effects first-quarter 2011 financial results.

Before we begin our call, we would like to remind you that the statements made by the Company during this call that are not historical facts are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include but are not limited to, statements regarding the Company's revenue and earnings projections, business plans and objectives, capital investments, capital structure, expected future financial and operating performance, future products and services, future market opportunities and other financial matters.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those highlighted in the Company's press release, issued last night; and in the Company's most recent annual report on Form 10-K, and other periodic and current filings with the Securities and Exchange Commission. Such forward-looking statements are current only as of the date they are made. The Company disclaims any obligation to update any forward-looking statements in the event of changing circumstances or otherwise. And now I would like to call -- to turn the call over to Pete Aquino. Pete?

Thank you, Richard, and good morning, everyone. Welcome to our first-quarter call. Well, we've achieved many objectives for the first quarter, including closing Arbinet on February 28 as Richard said, which brought in an additional $16.5 million in cash, and we immediately began real-time integration. You will note that in this quarter, we took a $2 million expense charge to EBITDA for a one timer, to account for severance as a result of the combination.

We also made progress in our operations, whereby primary focus had been in two areas, margin expansion, and reallocation of capital to our best growth prospects. Including high speed Internet-based products and services for both the consumer and SMB segments, our Tier 2, Tier 3 data center expansion opportunities, and metro fiber rings for our commercial customers. As I mentioned last quarter, strategic investments of $5 million to $10 million in incremental CapEx are planned for 2011, and will be directed toward our data center and metro fiber ring projects in Canada and Australia.

We are absorbing any new capital requirements for Arbinet in our existing budget, and are confident now that our program is right-sized for our financial and operating goals for this year. We will continue to improve operations in all four key business units, which are Canada, Australia, International Carrier Services, and US retail, with the aim to build on our positive free cash flow profile. Normalized for one timers, PTGi produced $14 million in cash flow from operations this quarter alone, defined as EBITDA less CapEx.

Including our growing cash balance, and $16.5 million of Arbinet cash, we ended the quarter near $66 million, which is a significant cushion that allowed us to pay down $24 million in debt in April. This is a great start for the year. I'm also happy to announce that we were able to reach agreement with the holders of about 70% of our 13% notes on revised terms for a debt exchange. And we plan to launch, in about a week, with their support agreements in place. The offer will be conducted on a private basis with holders of the 13% and 14.25% notes, who are qualified institutional buyers or accredited investors.

This exchange does not contemplate the need to raise any equity at this point. The net improvements to free cash flow from interest savings, including the paydown of the 14.25%'s and this exchange, are expected to be nearly $9 million a year in savings, with no near term maturity. And finally, just as an update, we will continue our efforts to be listed. And don't have any comments today to report at this time, but we'll keep you posted.

So let's -- so given this backdrop, let's move to slide three for first quarter highlights. Consolidated results for the portfolio produced $224 million in revenue for the first quarter, which includes one month of Arbinet revenue. With this acquisition complete, we reported a 16% increase year-over-year. Gross margin was slightly higher year-over-year on an absolute basis, at approximately $71.5 million, virtually by adding one month of Arbinet.

And as most of you know, wholesale business gross margins industry-wide are approximately 5% to 7%, thereby revising our consolidated gross margin percentage to 32%. Please note that this is before any real integration savings are captured. Moving on to normalized EBITDA, we're pacing at over $20 million a quarter, and focused on margin expansion initiatives in all four business units. Our capital program was $6.4 million, which is down from the fourth quarter, but in line with our strategic goals and timing for the year.

As I mentioned before, PTGi ended the first quarter with nearly $14 million of positive free cash flow from operations. So let's move to slide four to review the sum of the parts. Our Canadian business is leading the pack with over $12 million in EBITDA and $61 million of revenue. And this is driven by management's focus on on-net products and services, for both consumer and business segments.

In addition, Canada has a heavier weight and highly profitable data center assets, as compared to Australia. Today, we have seven data centers in Canada, in some of the best markets in the country, Toronto, Edmonton, Ottawa, Vancouver and London. And we're targeting medium-sized customers, where there is a significant market opportunity. In addition, with our Tier 3 facilities, we're actively engaged in many upper-end enterprise RFPs.

Looking forward, we're starting to approach a high class problem, and we need to expand to capture new demand for our managed services, [co-low], and emerging cloud offerings. Our team in Canada is putting the finishing touches on expansions plans for 2011 and 2012, with additional capital made available for organic growth. We are very excited to fuel this opportunity with a team with great expertise in data center design and management.

Other tactics embraced by both Canada and Australian teams are to harvest very profitable, yet downward trending RGUs, such as long distance. We are proactively offsetting these declines with additions in IP-based voice and data services across our serving areas. The combined efforts by our Australian and Canadian country managers throws off about $21 million in EBITDA, and about $15 million in positive free cash flow from operations on a quarterly basis, two very good performers in the portfolio.

Regarding the specifics for Australia, revenues are higher than Canada at $72 million, with $9 million in EBITDA for this quarter. We see potential margin improvement by moving more products and services on-net, and we can influence the future mix with more targeted marketing, and adding CapEx in areas where we have customer concentration. Relative to Canada, Australia has three data centers aimed at small and medium businesses, with the lower contribution to its overall EBITDA. However, the big opportunity in Australia is in the fiber rings that we have in five of the largest metros, Sidney, Melbourne, Perth, Adelaide and Brisbane.

We now have our engineering teams embarked on a phase one of a grooming project that will leapfrog our high speed data network right into first class, with a low latency platform, aimed at SMB and enterprises in the central business districts. Typically, the hardest part of building metropolitan fiber rings is the civil works, including designing, permitting and construction. Civil works usually defines the barrier to entry, and certainly the speed to market. The good news here, is that we already have hundreds of strands of fiber already in the ground in the right locations.

We pass approximately 1,000 buildings within a block of our networks in Sidney and Melbourne, the top two CBDs in the country. And overall, we have over 7,000 fiber miles in our five metros. We're also in the process of making decisions on building equipment to upgrade to scalable access points, for the long term. We are extremely excited about these prospects, and consider these as our top priorities for Australia.

Moving on to PTGi international carrier services, this is a new name for the combined Primus wholesale and Arbinet teams. Net revenue was $73 million in Q1 by just adding Arbinet in March. Although early in the integration game, we're confident we can achieve $3 million to $7 million in cost synergies, and are pushing to get ahead of schedule. And last but not least, our US retail engine is beginning to be a real player in the portfolio. The product set is refocused strictly on IP-centric services that don't require a lot of touch points. We're now positioning for new customer acquisitions, via web-based, self-service applications.

Our products are branded as Lingo for consumers and small business, brought to you by PTGi. Features provided by our broad soft platform mimic those of Vonage, Symbian, Paetec and the like. We are growing this business gradually and profitably, through tight controls and organic methods to ensure that we can scale only where we can make money and control churn. In the first quarter alone, our churn rate was only 2.6%, and this is down significantly from the past.

In addition, we're also lining up new markets to sell our higher end IP PBX services. We're primarily focused in LA, Houston, Dallas, and Puerto Rico, and starting to hit on all cylinders with consistency. But generally, I believe revenue declines in US retail will begin to level off, while the unit continues to improve EBITDA and positive free cash flow. So not a bad transformation for a segment that was historically a long distance and prepaid card business.

Below the line of our top four business units, we have Brazil. We're currently evaluating our strategic alternatives in the business unit driven by wholesale revenues on the top line, while EBITDA is primarily related to our data center there at San Paulo. Brazil is a great market to invest in these days, so I expect we'll have some good options to consider. So at this point, let me turn it over to Jim, to go through the financials in a little bit more detail. Jim?

Thanks, Pete. Good morning, everyone. As we indicated in the Q1 press release issued last night, first-quarter 2011 results include Arbinet's results from March 1, 2011 on. Therefore, the first quarter results are not directly comparable with prior periods. I will discuss Arbinet's contribution, as I move through the presentation. Let's move to slide five entitled financial summary, which provides four key financial metrics, and their trends over the last five quarters.

In the first quarter, net revenue increased 15.9% to $223.7 million on a year-over-year basis. Arbinet's contribution to net revenue was $26.8 million. The impact of foreign currency translation was a positive $13.1 million for the quarter. And on a constant currency basis, and excluding Arbinet, net revenue decreased 4.7%. The decline in traditional revenue services, such as residential LD and dial-up internet, was offset by an 11.7% increase in gross services revenue, including data center, SMB VoIP, broadband, and local on-net services.

Data center revenues alone grew 19.3% year-over-year, with a run rate greater than $40 million. Growth services comprised 24% of total reported net revenue, and comprised 27.3% of net revenue, excluding Arbinet's contribution, compared to 24.9% last year. And these services also contribute higher gross margins. Adjusted EBITDA, as reported, was $18.6 million, or 8.3% of net revenue in the first quarter of 2011, compared to $21 million, or 10.9% of net revenue, in the first quarter of 2010. Included in adjusted EBITDA in the first quarter was $1.7 million of severance and merger integration costs.

Excluding these costs, adjusted EBITDA was $20.3 million, or 9.1% of net revenue. Arbinet's contribution to adjusted EBITDA was minimal in the quarter. Adjusted EBITDA, as a percentage of net revenue, decreased 260 basis points, as 490 basis point decrease in gross margin was partially offset by a 230 basis point deleveraging of SG&A. In constant currency, and excluding severance and integration costs, SG&A was flat year-over-year, and this included $1.8 million of Arbinet cost.

The decrease in gross margin was the result of the following factors, the inclusion of Arbinet contributing a greater proportion of the lower margin wholesale revenue in the mix, which was partially offset by a better mix of higher margin gross services revenue, particularly in data center and local on-net; and the continued focus in wholesale on higher margin lower volume traffic. The impact of foreign exchange to adjusted EBITDA, year-over-year was a positive $1.6 million, and this represents our ninth consecutive quarter of delivering stable, adjusted EBITDA.

Capital expenditures in the quarter were $6.4 million or 2.8% of total revenue, compared to $4.9 million or 2.5% of total revenue in the first quarter 2010. Capital spending in the quarter was driven primarily by investments in Australia and Canada to expand our local on-net presence and build out our data centers, as well as maintain our existing infrastructure. Free cash flow in the first quarter 2011 was $9.6 million, compared to free cash flow of $12.8 million in the first quarter 2010.

Severance costs paid and higher capital expenditures were primary contributors to the decrease in free cash flow over the prior year quarter. Cash was generated during the quarter from $18.6 million of adjusted EBITDA, $14.1 million of cash and marketable securities acquired from business acquisitions net of cash paid, and $2 million of working capital, offset by the usage of $6.4 million of capital expenditures, and $4.1 million of severance paid.

Moving on to slide six, to review our operations in Canada. Canada delivered, in local currency, first quarter 2011 revenues of CAD60 million, and adjusted EBITDA of CAD12 million, or 20.1% of net revenue; as compared to revenues of CAD59.8 million, and adjusted EBITDA of CAD12.1 million, or 20.2% of net revenues in the first quarter of 2010. The pie chart on the left shows the breakout of Canada's revenues by type of service. Data center, VoIP, and broadband services comprised 32% of our revenue. Long distance, local, prepaid, wireless and dial-up services comprised 65%, and wholesale services contributed 3%.

Net revenue was flat year-over-year, as declines in residential long distance and prepaid cards were offset by increases in residential local, broadband, and data center revenues. Among faster growth services, broadband revenues grew 12.3%, and data center revenues grew 6.7%, as compared to the first quarter of 2010. This increasing contribution from higher margin services, as well as effective cost management, contributed to maintaining Canada's high and stable EBITDA contribution.

Let's now move to slide seven to review our operations in Australia. Australia delivered, in local currency, first quarter 2011 revenues of AUD71.3 million, and adjusted EBITDA of AUD9 million, or 12.6% of net revenue; as compared to revenues of AUD77.3 million, and adjusted EBITDA of AUD12.9 million, or 16.6% of net revenues in the first quarter of 2010. The pie chart on the left shows the breakout of Australia's revenues by type of service, data center, VoIP, broadband and local on-net services comprised 40% of revenue. Local, long distance, prepaid, wireless, and dial-up service comprised 51%, and wholesale services contributed 9%.

Year-over-year, net revenue decreased 7.8%, as declines in residential, local, and dial-up revenues were partially offset by growth in data center and local on-net revenues. Gross margin decreased 110 basis points from 40.5% in Q1 of 2010, to 39.4% in Q1 of 2011, primarily due to the loss of high margin dial-up internet. A slight increase in SG&A costs and declining revenues contributed to the deleveraging of adjusted EBITDA. And we will continue to focus on ways to better manage our costs in Australia, until we realize returns from our capital investments in the form of net revenue growth.

Let's now move to slide eight to review our International Carrier Services operations. ICS revenues in the first quarter of 2011 of $73 million increased 57%, primarily due to the inclusion of one month, or $26.8 million of Arbinet revenue, from $46.5 million in the first quarter of 2010. The impact of foreign currency was a positive $2.1 million. On a constant currency basis, and excluding Arbinet's contribution, net revenue decreased 5%, as we continue to target higher margin traffic, especially US domestic terminations where the margins are much higher than those of internationally terminated traffic.

ICS gross margin, excluding Arbinet, was 4.6%, a 30 basis points improvement over last year after adjusting for an accrual lease in 2010, reflecting the positive impact of our efforts to target higher margin routes. Including Arbinet's contribution, wholesale gross margin was 5.1%. With Arbinet, we now offer two core products to wholesale customers, high touch traditional carrier direct services, and the exchange marketplace where customers can trade minutes of use. The table below the revenue chart shows trends for the past five quarters for minutes of use, as well as Arbinet's minutes of use in the first quarter of 2011.

As you can see, Arbinet brings a significant amount of minutes, in addition to the increased minutes of use achieved by Primus in the first quarter. As we discussed on our last call, the combined ICS unit generates over $500 million of revenue, and the increased scale should enable us to leverage the combined minutes to improve our run rate gross margin to over 7%. Our integration effort of acquired Arbinet operations is well underway, and we're on target to realize over $3 million of cost synergies in 2011, and $7 million in 2012.

Moving on to slide nine, to discuss our US operations. US retail net revenue decreased 19.3% in the first quarter of 2011 to $11.2 million, due to the decreases in retail voice services and consumer VoIP. US retail adjusted EBITDA, again improved on a year-over-year basis to $1.6 million or 14.2% of net revenue, a 790 basis point increase over last year. The combination of price increases, cost reductions, and improved customer metrics such as churn and customer additions, all attributed to the increase.

As we invest in this business, we are introducing new products into the US market, targeted mainly at the SMB segment that can benefit from lower cost IP-based solutions. We also entered new markets in Los Angeles, Houston, and Dallas, markets in which we believe this segment is under-served by local competitors, and offer managed hosted PBX and high speed ethernet-over-copper solutions.

Moving on to slide ten to discuss our balance sheet. We ended the first quarter of 2011 with $65.7 million in unrestricted cash and cash equivalents, up from $41.5 million in December 31, 2010. Cash was generated during the quarter from $18.6 million of adjusted EBITDA, $14.1 million of cash and marketable securities acquired from business acquisitions, net of cash paid, and $2 million of working capital, offset by the usage of $6.4 million for capital expenditures and $4.1 million for severance paid.

Our long term obligations at quarter-end stood at $245.6 million, and at quarter-end, our leverage and coverage ratios continued to improve from last year, as we generated free cash flow. As part of our efforts to transform our balance sheet, in April we redeemed $24 million of our 14.25% notes on a pro rata basis. This redemption leaves $90 million of principal amount outstanding, and results in an interest savings of approximately $3.4 million per year. It also improves, on a pro forma basis, our total debt to LTM adjusted EBITDA to 2.6 times from 2.9 times, and our interest coverage ratio to 2.6 times from 2.3.

With this solid start to the year, we've remained focused on improving profitability and free cash flow generation by investing in services that are in demand by customers, and harvesting more mature services for cash flow to support our investments in growth, and to further transform our balance sheet. We remain committed to reducing our debt and interest burden. That concludes my prepared remarks. I will now turn you back over to Pete for his concluding remarks. Pete?

Thanks, Jim. So to wrap up our prepared remarks, please turn to slide 11. We've accomplished some big things in the first quarter. We added another quarter of consistency, and positive free cash flow from operations. We've kept our eyes open for synergistic tuck-ins, to capture opportunities in our footprint. We closed Arbinet on February 28, and acquired $16.5 million in cash, which came in pretty handy, allowed us to buy back $24 million of the 14.25% notes at par. And literally, just a couple days ago, we reached agreement with our largest bond holders in a support agreement to re-launch our debt exchange.

So with this type of momentum, we expect to execute throughout the year, and methodically invest in growth opportunities to build value for the future, including IP-based products and services, data centers and metro rings. And we will continue to optimize the portfolio through dispositions, and tuck-ins, while aggressively influencing the shift in products and services to improve margins. And finally, we will focus on the follow through of our refinancing in the next couple of weeks. At this point, we will be happy to take your questions. Operator?

(Operator Instructions)

William Pulman, Brencourt.

Hi, guys. Thanks for taking the call. I wonder if you couldn't elaborate a bit more, in terms of the re-listing process? I know you mentioned this process has been ongoing for a month or two now, but any additional color in terms of what is going on?

I'm sorry, I missed the question. Up front, Will?

Sure. I wondered if you couldn't talk a bit more about the re-listing process?

Oh, okay.

What is going on there?

At this point, we really don't have any more comments on the listing. It 's work in progress, and we're focused on it. That's all we can say at this point.

Okay. So, I mean, not to push you a bit more, but I mean in terms of this is in, say, the NASDAQ's hands, or it's out of your hands at this point? Or is that fair to assume?

I would just say no comment at this point. Look forward to a future update; but, rest assured, we're working on it.

Okay. Thanks. And I guess, just in terms of the growth rate, in terms of what you guys are assuming within Australia and Canada. If you look at those guys, ex-currency, is that kind of indicative of what you'd see for the balance of the year? Any other trends or other things you might expect, to kind of skew the growth rate going forward there?

Growth rates in revenues or EBITDA? Which one specifically? (Multiple speakers). Sorry.

In revenues. (Multiple speakers).

Okay. Well, there's a lot of good activity in both of those countries. First of all, industry-wide, in Canada, I believe we have a really good opportunity in the data center business. So, growth opportunities in the SMB segment, as well as data center growth, it looks pretty good for us. And also the industry itself, in Canada, so we're pretty positive about that. In the case of Australia, with the National Broadband Network initiative, as well as our specific opportunity in private networks, we see some good upside there as well. Both of those countries, frankly, are just really great places to be investing in these days. So we like our lie there. We can't really guide to specific growth rate potential. I would just say, we're very optimistic that we're in the right place with the right products and services.

Got it. Thank you.

Tom Koch, Tejas Securities.

Tom, this is Richard. Did you have a question?

Yes, hi. Sorry. My question was just regarding Australia, a little bit of follow up to the last question, as far as the -- looks like the local currency trend was down a little bit. You've got a lot of new products coming on, and offsetting some of the older products. Would you kind of expect that the new product revenues when -- and cash flows will start to pick up and exceed the decline, I guess, in some of the more legacy products? Or how do you see that playing out?

Yes, I mean we are getting closer to the -- I guess what I would call the inflection point, to where the growth services are outpacing the decline in residential. The DSL -- there is not much more revenue left in DSL, which we've take a big hit in the last year, in some of our large declines. So, I mean, hopefully that is coming near an end, where most people are switched out of the dial-up internet, I'm sorry. So we will still continue to have -- fight that battle through this year, but hopefully start to turn, towards the end of the year into next year, as we start to harvest some of the investment in the capital expenditures that we put down there.

Okay, great. And I have just one other which is, can you talk a little bit about these acquisitions you did?

Yes, specifically, they're very small tuck-ins, in the $2 million to $3 million range, with payment plans over time. What they're -- there is really two of them that we did, one in Australia, one in Canada. In Canada, it was in the SMB segment with some nice upside, very synergistic, not a lot of overhead, plugged right in. In the case of Australia, it was in the data center business, it was actually a tenant of ours in one of our existing sites, and we took over his business there. Again, very small, $2 million plus or minus, kind of investment, with payment plans where we can get them. And they just make sense to us. Anybody that is in our footprint, that is really in the small tuck-in kind of format, is fair game for us. We will look at those as we go.

Does tuck-in mean that it has -- it contributes EBITDA?

It could. It could contribute EBITDA -- usually has a quick pay back. And it basically means, from an overhead perspective, we almost have everything covered already -- in terms of back office, facilities themselves. So when we say tuck-in, we really mean highly synergistic, fits what we do, can integrate very quickly, quick pay back.

Okay, thanks.

You're welcome.

(Operator Instructions)

Keith Rosenbloom, Care.

Hi, guys. Thanks for the presentation. And congratulations on the debt deal.

Thank you.

Maybe you guys could -- I know you're not giving projections, but maybe you could just clarify a little bit on what is going on with the wholesale business. You're saying that you think you can realize $3 million to $7 million of OpEx synergies, but you're also saying that you think you can move gross margins, currently are 5% to 7%?

The industry, Keith, is about in that range. Everything that we studied in the peer group suggests that best-in-class is there.

Right.

So in the wholesale business, it is very -- has razor thin margins, so it has a lot of attributes for retail traffic. And that's why we like the idea of having Canada and Australia feed into ICS. But from an industry perspective, at least from our study, it suggests that the best-in-class are doing that. So, what we need ultimately is scale in that business, and Arbinet provided that scale, basically doubled what we were doing.

It also added another product. From a carrier sales perspective, the direct sales was something that we did very well at Primus historically, and Arbinet was great at the exchange. And in their claims, early on, was the best in the world, or the biggest in the world. So we really like having that product and size, it's very flexible for small, medium carriers to enter the exchange.

So our team is working very hard to basically re-present the 2 products to the carriers. And it is just getting off the ground, as you can imagine, with the integration just being under way. But the team is very excited about the new product, the 2 distinct products, and we like having that wholesale business inside, given our retail traffic.

And if -- do you think that -- given what's going on with pricing in the industry, do you think that you'll be able to, I guess, garner those increased margins by the end of this year?

Timing-wise is -- if you think about integration of 2 public companies, the public company costs integrated pretty quickly. We have a lot of duplicates in facilities, so we have to look at the network cost line that is in the cost of sales. We have 2 locations in LA, 2 locations in New York, 2 locations in London. We got 2 [NOCs]. So when you think about real estate alone, those duplicates take time to kind of work out, because they have contracts. But -- so that affects to a certain extent, the cost profile, and the timing of it.

The people integration -- and basically we're building an all-star team right now. And our team is working very hard to basically keep the best of the best that we have, to perform all the services for carriers of the future. So I think the people side, and the all-star team selection happens faster. Some of the contracts, like I said in real estate, and elsewhere, take a little bit longer.

Okay. And then lastly, you didn't talk about some -- it sounds like you found a lot of assets when you started digging in here, Pete. Is there any value to that -- the Canadian joint venture spectrum, or some of the other assets that you're finding?

Yes. (Multiple speakers). -- a little bit over 6 months, and some of the assets that are hidden, like the fiber assets in Australia, like the spectrum that we have in Canada -- although there is not a lot of it, and you could argue it is not in the best spectrum block, but it is spectrum and it is a limited resource, so we like having it.

But some of these smaller hidden assets are something that the new management team is really trying to pull out of the body, and see if there is a market for it. As in many cases, they may be non-core in the case of the spectrum potentially, but the fiber assets in Australia are very interesting, because originally the fiber was intended to interconnect the Telstra exchanges. And over time, if you do that long enough -- over 5 or 6, 7 years -- sooner or later you have fiber rings, because you're connecting all of the exchanges.

And I think, ironically, in the activity that happened in the United States -- probably over the last 10 years, regarding some of the CLEC fiber companies, like the above nets or the RCN Metros, and those types of companies -- accumulating fiber rings in metros is really great for the CBD and for the commercial customers. And they may be just a little bit behind there in Australia -- and the fact that we have them and our engineers can groom them, and put the electronics on the network, since the fiber is already in the ground, I think that's a great place to work. Although hidden, it is just fiber everywhere, and we need to bring that to the forefront, and re-groom that asset. So we're working on that today.

There are no further questions at this time. I will now turn the conference back to Mr. Aquino for any closing remarks.

Thank you, operator. And thank you all for your questions. So we hope to give you a new update very soon. And certainly look forward to talking to you again, in our second quarter call. Thank you very much.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your lines.