RCN Reports From Annual Shareholders Meeting
Regulatory Approvals Secured for 13 Million Homes
Company Currently Operates in 7 of the Top 10 US Markets and is Pre-Funded
PRINCETON, N.J., May 16 /PRNewswire/ -- RCN Corporation (Nasdaq: RCNC - news) today announced at its 1999
Annual Meeting of Shareholders, held at the Marriott Hotel in Princeton, New Jersey, that it has secured regulatory approvals to cover over 13 million homes, up from 11 million, at the federal level and over 5 million homes, up from 4.5 million, at the local level. These approvals give the company a significant competitive advantage in the construction of its Megaband(TM) Network in the densest markets in the country. RCN is in 7 of the top 10 most densely populated US markets and is pre-funded in all the markets where it currently operates. In addition, RCN has sufficient capital to enter several new markets and believes it can bring them to profitability.
``We have been very conservative in the execution of our plan -- from the design of our network to the funding of our business plan. One of RCN's core values is not to enter a new market unless it is pre-funded. We believe that we have enough capital for future expansion to additional markets. Without raising any additional capital, we could reach 5 million homes over a short period of time in the best markets in the country,'' said David C. McCourt, Chairman and CEO. ``We are building a network with 85% excess capacity and with the ability to continuously allocate capacity for additional services at little or no cost if we
underestimated the residential need for bandwidth.''
RCN has approximately $3.6 billion in available cash. The company has earmarked these funds for the construction of its fiber-optic network and to the growth of its operations to support its expanding customer base which is nearing one million connections.
The company's plan calls for the allocation of 90% of its capital to the development of its Megaband(TM) Network -- an asset that has the ability to carry all services with known demand -- local and long distance phone, cable and high-speed Internet -- as well as additional future services. Therefore, the ability to access additional revenue streams, without increasing its costs, places RCN in a unique position among other operators that need to upgrade their current outdated networks to provide the bundled services consumers desire today.
RCN Operates in 7 of the Top 10 US Markets
RCN operates or has begun to build in seven of the ten top US markets -- Boston, New York, Philadelphia area, Washington DC, Chicago, San Francisco and Los Angeles. McCourt noted the importance of staying ahead of the curve on regulatory approvals at both the federal and local levels in new and existing markets. As part of its strategic planning process, regulatory approvals are normally secured in markets where the company is considering delivering its high-bandwidth offerings ahead of any capital raised for future expansion. This is due to the time-intensive nature of obtaining the necessary regulatory authority and access to rights of way for service delivery.
``We have a regulatory group and a corporate development group that continuously seek ways to leverage our network
expertise and expand our operations in other dense markets. Our corporate development staff is charged with finding the best possible way to enter new markets through acquisitions, alliances or on our own, after weighing the size of the opportunity, the
ability to secure rights of way and most importantly, the market's revenue-generating potential,'' added McCourt. ``Given the level of demand we have seen in the market for bundled services, it is important that we always think ahead and plan for tomorrow without ever losing sight of our current operations and our need to stay focused on improving our local operations.''
First Quarter Operational Improvements Support Growth
RCN reported improvements to its back office operations, training and development and customer care efforts in its first quarter results released on May 5. McCourt reviewed the operational initiatives undertaken in the quarter to support its growth. RCN's on-net revenues increased 21%, its on-net connections increased 15% to 255,913, the number of towns under construction increased 27% to 62 and its fiber-optic route miles increased 29% to 4,696.
McCourt said that over 40% of the company's technicians have now been trained on all three services. The Customer Care
area increased the number of Customer Service Representatives (CSR's), added 200 provisioners and initiated a ``Warm Call'' program, which contacts customers within 48 hours after initiating services. Partly as a result of these initiatives, the number of calls per connection decreased by 15%. In terms of back office support, the RCN Information Technology group developed a
tracking and billing system to support its ResiLink bundled services, and hired 60 IT professionals, including two senior executives.
ResiLink Bundled Service Penetrations Ahead of Plan
During the quarter, RCN officially launched its ResiLink bundled packages that include local phone, up to 150 channels of cable programming as well as high-speed Internet to 90,000 homes, nearly five times as many homes as in its expanded test market area in Boston-area suburbs.
McCourt noted the early success of the ResiLink bundles. ``Half of the increases in on-net connections resulted from ResiLink sales and by the end of the year, we expect to have ResiLink available to at least 300,000 homes.''
ResiLink is being made available in all new markets the company enters. In initial test markets, customers are taking over three services and the revenue per subscriber is $125-$130 as compared to over $80 on an a-la-carte basis. The ResiLink plan allows customers to choose from four different packages priced from $69 to $149, and all of the services appear on one bill. This increases the value to the consumer who only interacts with one company for all their communication and entertainment needs.
New RCN Headquarters in New Jersey Puts Employees Under One Roof
As a result of RCN's significant growth and anticipated increase in employees in New Jersey, RCN plans to build a new office park to increase efficiencies and improve communication. Regionally, the company employs over 600 people in New Jersey alone and expects to increase its New Jersey base to over 2,000 within the next three years. RCN expects to increase its overall employee base to over 14,000 employees from its current 5,200 by the end of 2002.
``We are building this company to be a major force in the growing competitive telecommunications market. The new office complex will improve overall communications because we will be under one roof as well as accommodate our short-term and long-term growth needs. At the end of the day, it was a lease versus own decision, and by building our own complex, we will reap substantial savings,'' said McCourt.
By building instead of continuing to lease, RCN expects to save an estimated total of $72 million, including $26 million in incentives from the state. The corporate headquarters will be built in phases as the company grows and the first phase is expected to have 560,000 square feet. The new RCN headquarters will be located on 134 acres at Princeton Pike and Lewisville Road in Lawrence Township. RCN plans to begin building in July and occupy the new space in 2002.
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