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Technology Stocks : Metro One Telecommunications--MTON -- Ignore unavailable to you. Want to Upgrade?

To: Venkatesh Nakkala who wrote (400)	6/27/1998 9:58:00 AM
From: majormember	Read Replies (1) \| Respond to of 608

MTON NEWS: PORTLAND, Ore., June 25 /PRNewswire/ -- Metro One Telecommunications, Inc. (Nasdaq: MTON), a leading provider of enhanced directory assistance (EDA) to the telecommunications industry, today announced that its contract with BellSouth Cellular and portions of its contract with Ameritech Cellular are not expected to be renewed when they conclude this year. The company also announced that revenues in its second quarter ending June 30, 1998 are expected to be greater than current investor expectations. Second quarter revenues are currently expected to be in the range of $10.7 to $10.9 million. That is nearly double 1997 second quarter revenues of $5.5 million and continues the company's recent record of rapid year-over-year growth. Metro One has been providing a limited version of its service to portions of the BellSouth Cellular subscriber base in south Florida under a contract that concludes at the end of June 1998. The company has been informed that directory assistance for these customers will be handled by internal BellSouth capacity when the contract with Metro One concludes. The BellSouth contract provided less than 3% of revenues in the first quarter of 1998. The portion of the company's Ameritech Cellular EDA contract pertaining to the Chicago market, although currently on extension to July 1998, is not expected to be replaced by a long-term contract. It is expected that Ameritech will handle directory assistance calls for both the Chicago and Detroit markets with its own internal personnel. Service for the Detroit portion of the contract is contractually scheduled to conclude in November 1998. ''The conclusion of the BellSouth business will have a minimal impact on our revenue growth, which has been approximately 100% on a year-over-year basis for the last two quarters,'' commented Timothy A. Timmins, president and CEO of Metro One. ''We continue to see substantial growth from our other customers, who do not require their subscribers to go through a 'gateway' to reach our operators, and we have ongoing business discussions about new contracts with other communications companies. ''The Chicago Ameritech business, which represented approximately 10% of our revenues in the first quarter of 1998,'' continued Timmins, ''is obviously meaningful and we would have liked to retain it. We do feel that the growth we are currently experiencing within our existing customer base plus growth we should be able to generate from new business should more than make up for the completion of this particular portion of the Ameritech Cellular business and that of BellSouth.'' Metro One Telecommunications, Inc. is an independent developer and provider of Enhanced Directory Assistance services for the telecommunications industry. The company operates call centers located throughout the U.S. Revenue for the full year 1997 was $26.1 million. Revenue for the first quarter of 1998 was $9.0 million, or 102 percent above first quarter 1997 levels. ****************************************************************** Analyst Comments: The good news is that the second quarter is stronger than we anticipated just two weeks ago. In our last report we increased our expectations on both the top and bottom line. Three months ago our revenue estimate was $8.8 million with earnings of $0.04 per share. We increased the estimate to $10.5 million in revenues and earnings of $0.05 per share in our June 1998 report and the Company just announced that they are going to exceed our expectations again, hitting the $10.7 to $10.9 million range. As we detailed in our last report, the strength in the revenues continues to stem from both new service areas and increased call volume under existing contracts, in particular Sprint. The bad news stems from the loss of two contracts, Bellsouth and Ameritech Cellular. From a modeling standpoint, we had already discounted Bellsouth's potential contributions. The agreement was MTON's lowest price point and the volumes were not that significant (due, in our opinion, to the structure of the relationship and management's partial adoption of MTON's service while maintaining their own operators). With the contract expiring at the end of June, Bellsouth intends to handle the call volume internally. We anticipate that the loss of this contract will have a minimal impact on the Company. The loss of the Ameritech contract is more significant, however. Comprising 10% of MTON's business, the loss of the contract came as a surprise. The majority of the impact should stem from the Chicago contract, which ends in mid-July. The Detroit business will shut off in November. We anticipate that the start-up of the AT&T business and the 360 Communications business will more than offset the loss long term. We estimate the total revenue impact will be about $500,000 to $750,000 this year, with the majority of the shortfall coming in the third quarter. We are looking for revenues to reach $43 million this year, representing a 65% increase over last year. Net income should double last year's results, hitting $2.9 million, or $0.25 per share. While the news is somewhat disappointing, we are maintaining our "A" in belief that the news will be immaterial in the context of the overall long-term picture. Q1: Mar Q2: Jun Q3: Sep Q4: Dec Annual 1998-E REVENUE $9,045 $10,700 $10,850 $12,450 $43,045 GROSS-MARGIN 47.01% 47.50% 47.25% 49.50% 47.91% OP-MARGIN 2.78% 6.75% 6.25% 11.80% 7.25% EPS $0.02 $0.06 $0.05 $0.12 $0.25 1997 REVENUE $4,486 $5,468 $7,055 $9,081 $26,090 GROSS-MARGIN 45.75% 50.68% 51.53% 50.81% 50.11% OP-MARGIN -10.06% 1.26% 9.68% 11.79% 5.26% EPS ($0.04) $0.00 $0.07 $0.10 $0.13