Lines sold as well as lines installed were quarterly records, with new lines sold increasing from 135,500 in 3Q00 to 152,000 lines in 4Q00. Lines installed also showed record growth, with new lines installed increasing from 91,900 in 3Q00 to 1058,000 in 4Q00. To date, Allegiance has installed 607,700 lines of which 90 percent were on switch.
These strong quarterly results complete a year 2000 performance highlighted by continuing explosive revenue growth with significant margin improvement, said Royce J. Holland, chairman and CEO of Allegiance Telecom. We expect to continue this winning combination of high octane growth and rapid network expansion with continued margin and EBITDA improvements in 2001. This rapid growth, in tandem with improved margins demonstrated in 2000 and forecasted in 2001, represents further validation of the strength of our business plan and ability to execute.
According to Holland, the Company expects 2001 to be another year of rapid revenue growth and network deployment with the following financial and operational targets:
Revenue growth of more than 90 percent, resulting in a 2001 revenue target of approximately $550 million.
Installation of more than 500,000-plus new lines, with a year-end 2001 total in excess of 1.1 million lines.
Service initiation in the remaining nine markets of Allegiance’s 36 market plan, and the addition of approximately 215 collocations.
Activation of SONET fiber networks to replace leased capacity in at least 19 markets.
Continued improvements in gross margins and EBITDA, with a capital expenditure budget of approximately $350 million.
Allegiance Telecom continued to post strong gains in its addressable market during the fourth quarter, adding 84 new collocations. At the end of December, the Company was collocated in 636 central offices for unbundled loops, representing an addressable on-switch market of approximately 16.46 million local business access lines.
Allegiance Telecom again posted a strong sales increase for the quarter, with lines sold increasing from 135,500 lines in 3Q00 to 152,000 in 4Q00, an increase of 12 percent compared with 3Q00 and an increase of 102 percent compared with 4Q99. Lines installed also showed significant growth, with organic lines installed increasing from 91,900 in 3Q00 to 108,000 in 4Q00, an 18 percent increase in new installs compared to 3Q00 and an increase of 79 percent compared with 4Q99.
For the fourth quarter and for the year ended December 31, 2000, Allegiance Telecom had consolidated revenues of $95 million and $285 million, respectively. This represents an increase of 19 percent as compared with 3Q00 and an annual increase of 188 percent over 1999. Allegiance continues to use its capital to support the development of new markets, resulting in a fourth quarter EBITDA loss of $29.9 million and capital expenditures of $101.8 million. The Company continued on its path to profitability with EBITDA loss as a percent of revenue for the quarter at 31.5 percent, versus 39.6 percent in 3Q00 and 68.2 percent for 4Q99. For the full year 2000, Allegiance posted an EBITDA loss of negative $117.9 million and total capital expenditures of $445.52 million.
Gross margin continues to improve; for 4Q00, Allegiance Telecom’s gross margin was 50.4 percent, up from 47.7 percent in 3Q00.
Allegiance Telecom used approximately $185.2 million of its cash and short-term investments during the fourth quarter to further expand its operations, capital expenditures related to switching platforms, collocations, construction of its SONET fiber networks and its data network which supports the Company’s product suite of local, long distance, data and Internet services and acquisitions, said Thomas M. Lord, Allegiance executive vice president of corporate development and chief financial officer. At December 31, 2000, Allegiance had an undrawn committed credit facility of $500 million and more than $670 million of cash and short-term investments. We believe that this liquidity fully funds Allegiance’s 36-market business plan.
To demonstrate its progress toward profitability, Allegiance Telecom is reporting operating results for nine of its markets that began service in 1998 or early 1999 and achieved positive pre-overhead EBITDA during the fourth quarter. These nine markets are Dallas, New York, Atlanta, Fort Worth, Chicago, Los Angeles, San Francisco, Boston and Houston.
In 4Q00, the nine markets achieved revenue of $59 million, with a gross margin of 57.1 percent. Pre-overhead EBITDA was a positive $11.6 million, representing a pre-overhead EBITDA margin of 19.6 percent versus 1.5 percent for 4Q99.
Market penetration in the nine markets increased to 4.7 percent based on addressable switched access lines. Based on a rough estimate of ILEC total equivalent access lines, Allegiance’s market share in the nine markets is estimated in 2.5 to 3.0 percent range.
The success of these nine markets in terms of revenue growth, and especially pre-overhead EBITDA margin growth, clearly demonstrates the leverage in the Allegiance business plan and provides a clear path to profitability for the Company, said Holland. Despite continued explosive growth, Allegiance cut consolidated EBITDA loss margin by more than half during 2000 to 31.5 percent in the fourth quarter. In 2001, we expect to see other markets turning pre-overhead EBITDA positive, thereby driving the overall company EBITDA loss margin to the low teens by the end of the year and positioning Allegiance to turn EBITDA positive during 2002.
