Towerstream Management Discusses Q2 2012 Results - Earnings Call Transcript

Towerstream (TWER)

Q2 2012 Earnings Call

August 09, 2012 5:00 pm ET


Joseph P. Hernon - Chief Financial Officer, Principal Accounting Officer and Secretary

Jeffrey M. Thompson - Co-Founder, Chief Executive Officer, President and Director


Sanford Lee - Canaccord Genuity, Research Division

Scott Searle

Richard O’Leary - Lacuna, LLC

Daniel H. Gallancy - BeaconLight Capital, LLC

Jeb Terry



Good day, ladies and gentlemen, and welcome to your Towerstream Reports Second Quarter 2012 Financial Results Conference. [Operator Instructions] As a reminder, today's conference is being recorded.

And now I would like to turn the conference over to your host, Joe Hernon, Chief Financial Officer. Joe, please go ahead.

Joseph P. Hernon

Thank you, operator. During the course of this call, we may discuss some of the estimates, assumptions and other factors that our management currently anticipates may influence our business and results going forward. These forward-looking statements include expressed or implied statements regarding our business, including, without limitation, our future operating results and business developments based on limited information currently available to us. This information is subject to change, and all forward-looking statements are inherently speculative and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in forward-looking statements.

Such statements are subject to risks and uncertainties, including the risks described in the press release announcing this call and the risks discussed in the Risk Factors section of our periodic filings and other reports with the SEC. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. We undertake no obligation to publish, update or revise any forward-looking statement as a result of new information, future events or otherwise.

I'll now turn the call over to Jeff Thompson, our President and CEO.

Jeffrey M. Thompson

Thanks, Joseph. And thanks for joining us on the call today. Let me first touch on some of the recent events. We are happy to announce that we have reached an agreement to acquire a fixed wireless broadband company in Houston called Delos Internet. In this acquisition, we'll acquire 15 points of presence in the fourth largest city in the United States. It gives us new zip codes and a fresh market for our sales force. And most importantly, it gives us a platform in a large market to build our Wi-Fi and rooftop assets. Joseph will give you more details on -- later in the call.

Let me now talk about new carrier activity. Towerstream has recently signed a trial agreement with our third national wireless carrier. We hope that this trial agreement will turn into a long-term contract, but there are no guarantees at this time. Our network engineers are working diligently to get through this trial quickly and to turn this into traditional antenna leases.

We have also recently started a trial with a national news media company. Although we have been more focused on carriers and MSOs than the location-based services and media-advertised-based Wi-Fi, we have learned that having a strong brand drives much better initial results, and we've had better results than any of the advertiser we've had on our network thus far. As we finish this trial, we will update you on the progress.

I would now like to talk about our progress on our nodes and rooftop assets. In Q2, we have installed approximately 600 nodes. We are in schedule to install approximately 900 nodes in Q3. This pace puts us on track to reach our 5,000 goal node sometime in Q1 2013. We think this is very important to reach this milestone. The more nodes we have built, the more revenue we can generate. This is our focus, and we are on plan.

Now I'd like to update you, as much as I'm able to, on the carrier integration process. News [ph] since our last call, we now understand what it will take to get each carrier on our Wi-Fi offload network systems. Our teams are working very well together and making important progress. Much of the integration process includes software on specific smartphones being adjusted to seamlessly and automatically log on to our carrier class Wi-Fi network. For example, the iPhone has a different client than Samsung Galaxy, and we're going through phone by phone. This process, although tedious, will result in a seamless, quality user experience, which we believe will be very sticky in the long term

Some other developments that can streamline this process are the automatic log-on standard called Passpoint. Certifications have started, and we expect most phones coming out next year will support the standardized log-on procedure. Our technology partner, Ruckus Wireless is one of the first to get Passpoint certified. This can do 3 things for us in the future: one, it makes the amount of SSIDs irrelevant; and two, it will make future handset integration simpler; three, it can enable our customers to charge for Wi-Fi usage because of the seamless interaction between Wi-Fi, 3G and 4G.

I would now like to talk about the macro environment of the tower industry. The tower industry has entered a new phase of sustained and long-term growth. Never before have so many carriers been actively building at the same time. The carriers are also adopting a new way of building their networks, atypical to the traditional power model, what we call small cell. Verizon has recently stated that, "Even if Verizon were to stumble onto a spectrum bonanza, the increasing pressure to address growing, mobile data demand and to effectively offer cheap capacity would drive Verizon to implement small cell architectures in those new bands as well."Sprint and AT&T have made similar comments on aggressive small cell build-out.

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