Copyright 2006 AFX News Limited
AFX International Focus
October 19, 2006 Thursday 1:34 PM GMT
From Lexis Nexis

ATLANTA (AFX) - Internet service provider EarthLink Inc. said Wednesday it swung to a loss in the third quarter, hurt by a loss on its investment in a wireless venture and a decline in customers for dial-up Web access.

EarthLink posted a quarterly loss of $3.2 million, or 2 cents per share, compared with a profit of $36.4 million, or 27 cents per share during the same period last year. Analysts polled by Thomson Financial forecast a loss of 1 cent per share.

Revenue increased 4.5 percent to $331.3 million, from $317 million in the year-ago quarter. Analysts had projected revenue of $332.9 million.

EarthLink said it recorded a loss of $26.2 million related to its investment in Helio, a wireless service joint venture with South Korea's SK Telecom. The company recorded a loss of $4.6 million related to Helio in the year-ago period.

The company also said it increased operating and marketing expenses in the quarter to develop and market its broadband, voice and municipal Wi-Fi services.

EarthLink said its revenue gain was driven by growth in broadband and advertising and other value-added services revenues, which outpaced declines in traditional narrowband service and Web-hosting revenues.

For the quarter, dial-up Web access revenue fell 17 percent to $150.8 million from $181.2 million a year ago, and Web-hosting revenue dropped 13 percent to $8.7 million from $9.9 million a year ago.

Dial-up subscribers fell by 81,000 net subscribers, or 8.8 percent from the year-ago period, to end the quarter at 3.3 million. Web hosting accounts dropped 11.5 percent to 116,000.

Broadband access revenue rose 37 percent to $149.4 million. The company said it added 47,000 net broadband customers in the quarter.

Advertising and other value-added services revenue grew 36 percent to $22.4 million, driven by search and advertising.

For the fourth quarter, EarthLink said it expects to post a loss of $15 million to $25 million, on between $330 million and $335 million in revenue.

The company said it expects to record a fourth-quarter loss of $30 million to $35 million related to its investment in Helio.