Teleglobe Tanks on Q1 Results

Teleglobe International Holdings Ltd. (Nasdaq: TLGB), one of the handful of international carriers reborn after the telecom bubble burst, lost more than 10 percent of its value today as it recorded a first-quarter net profit of $2.48 million from revenues of $214.5 million.

The carrier, recently listed on Nasdaq following its acquisition of international VOIP wholesale carrier ITXC Corp., will unveil its results later today and host an investors' call after the markets close (see Teleglobe Int Joins Nasdaq and TeleGlobe Gobbles Up ITXC).

However, it has already filed its financials with the Securities and Exchange Commission (SEC); here are the highlights (all comparisons with the corresponding quarter, ending March 31, a year ago):

Total revenues down to $214.5 million from $229.9 million

Total operating expenses down to $209.5 million from $233 million

Net income of $2.48 million compared with a net loss of $26.9 million

Earnings per common share, zero

Current assets of $198.3 million, down from $207.5 million

The market had clearly been expecting better. The carrier's share price plummeted, and by midday it was down by $1.11, nearly 11 percent, to $9.20 from yesterday's close of $10.31.

Teleglobe could not be reached for comment as this article was published.

Along with some of its key rivals, such as Global Crossing Holdings Ltd. (Nasdaq: GLBC) and MCI (Nasdaq: WCOEQ, MCWEQ), Teleglobe has had a rough ride in the past few years, having been bought and sold on a number of occasions, most recently last summer to the current owners for $125 million (see Teleglobe Acquisition Complete, BCE Sells Last of Teleglobe, Teleglobe & BCE: Bad Vibes Up North, and Teleglobe Initiates Reorganization).

And it has needed help recently to expand its operations, as it borrowed $100 million to finance the acquisition of loss-making ITXC (see Teleglobe Takes Loan for Merger and ITXC Trims Q1 Losses).

But Teleglobe CEO Liam Strong, formerly of MCI, is bullish about the carrier's future. At a recent conference in London, Strong said that, although wholesale voice prices are falling all the time, the ITXC acquisition makes Teleglobe the world No. 3 for voice traffic (measured in minutes), and that costs can be cut, and margins maintained, by transporting all that traffic as voice-over-IP.

Strong said Teleglobe would have global VOIP transport capabilities by the end of this year, and claimed that VOIP infrastructure, which the company is sourcing from Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Ltd. (NYSE/Toronto: NT), costs "one fifth compared with TDM gear, and it speeds up our rollout into newly deregulated markets." However, most calls will still involve picking up or handing off to POTS networks to complete the call, and "the economics of VOIP only really start to kick in once you have end-to-end VOIP."

While that transition takes place, Strong and his team will need to find a way to improve the operator's financial fortunes. They'll also need to avoid any confusion with a near namesake, Teleglobe Communications Corp., which is in Chapter 11 and negotiating with its creditors.

A spokeswoman for Teleglobe International Holdings says the bankrupt company is "the remnant estate of the company that went into bankruptcy in May 2002. There are still assets and legal issues being worked out, including the court proceedings of the estate versus BCE Inc. [NYSE/Toronto: BCE] that have recently attracted this press attention." She adds: "We are an entirely separate and independent entity, and have no current legal or other relationship with the estate or its actions."

— Ray Le Maistre, International Editor, Boardwatch