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NetZero strikes deals to use Sprint LTE and Verizon 3G

jon fingas
Reporter
Updated ·5 min read
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We like the idea of NetZero's budget-friendly mobile broadband -- just not its use of Clearwire's small, aging WiMAX network. The provider should soon take care of that problem through new MVNO agreements with Sprint and Verizon. The five-year Sprint pact gives NetZero both LTE and EV-DO; the Verizon deal serves more as a safety net, supplying EV-DO alone for three years. Both agreements only take effect in the second quarter of 2014, but they should finally give the NetZero broad coverage and higher peak speeds that it needs to compete with more expensive rivals.

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United Online Reports Second Quarter 2013 Results

Spin Off of FTD Targeted to be Effective October 1, 2013

Recent Refinancing of FTD Credit Facilities Expected to Reduce Annual Interest Expense by Approximately $7 Million

NetZero Wireless Announces Mobile Broadband Wholesale Agreements with Verizon and Sprint, Significantly Expanding NetZero Wireless Coverage Area

Consolidated Revenues of $221.7 Million, Consolidated Operating Income of $14.0 Million and Consolidated Adjusted OIBDA of $34.7 Million

WOODLAND HILLS, Calif.--(BUSINESS WIRE)--Jul. 31, 2013-- United Online, Inc. (Nasdaq: UNTD), a leading provider of consumer products and services over the Internet, today reported financial results for its second quarter ended June 30, 2013.

"The planned tax-free spin off of FTD from United Online remains on track," said Mark R. Goldston, Chairman, President and Chief Executive Officer. "We expect the spin-off transaction will be effected before the market opens on October 1, 2013 and the proposed reverse stock split of United Online stock, if approved by the stockholders and the Board of Directors, will take place immediately prior to the spin off."

"We recently completed the refinancing of FTD's credit facilities, an important step as we progress toward the spin off," Goldston said. "This new credit agreement will reduce FTD's interest expense by approximately $7 million annually based on current LIBOR rates and will provide FTD with substantial capital and financial flexibility going forward. We believe this significant annual interest savings will more than offset the public company costs and the incremental ongoing operating expenses that FTD anticipates it will incur annually as a result of the separation once the spin off is complete. The new credit agreement provides FTD with a $350 million five-year secured revolving credit facility, of which $220 million was drawn at closing."

"We are pleased to announce two agreements that will significantly expand the coverage and enhance the offerings of our NetZero Mobile Broadband service," added Goldston. "We have signed a three-year agreement with Verizon to offer the NetZero Mobile Broadband service on Verizon's nationwide 3G network. When the service is launched, we expect NetZero Mobile Broadband will be available in approximately 500 markets and cover more than 300 million people, or approximately 95% of the entire U.S. population. Also, we have signed a five-year agreement with Sprint to offer the NetZero Mobile Broadband service via Sprint's 4G LTE and 3G networks. This agreement will allow us to expand our NetZero Mobile Broadband coverage to a projected 200 million people in 2014 on the Sprint 4G LTE network."

"Second quarter 2013 consolidated revenues of $221.7 million were slightly below our guidance range, while adjusted OIBDA of $34.7 million exceeded our guidance range by $2.2 million," Goldston said. "FTD segment revenues decreased 2% and segment adjusted OIBDA was relatively flat versus the year-ago period. During the quarter, FTD results were unfavorably impacted by the timing of the Easter Holiday. Approximately $3 million in revenues and $0.4 million in segment adjusted OIBDA were recorded in the first quarter of 2013, which in the prior year were recorded in the second quarter. Adjusting for the timing of the Easter Holiday and excluding the unfavorable impact of foreign currency exchange rates, FTD segment revenues remained relatively flat versus the year-ago quarter, while segment adjusted OIBDA increased 2%."

"In our Content & Media segment, pay accounts declined by 66,000 during the quarter, our lowest decline in pay accounts since the second quarter of 2010," Goldston continued. "The quarterly net decrease in segment pay accounts has now improved for six consecutive quarters. Year over year, Content & Media segment revenues and adjusted OIBDA declined 13% and 12%, respectively. Content & Media segment revenues and adjusted OIBDA both increased on a sequential quarter basis."

"During the quarter, Communications segment revenues and adjusted OIBDA declined 7% and 3%, respectively, compared to the year-ago quarter," said Goldston. "Communications segment revenues and adjusted OIBDA both increased on a sequential quarter basis."

"After the spin off of FTD, United Online will consist of its Content & Media and Communications segments, which delivered $243 million in segment revenues and $58 million in segment adjusted OIBDA during the last four quarters," said Neil P. Edwards, Executive Vice President and Chief Financial Officer. "Over the last several quarters, the Content & Media segment's net quarterly subscriber loss has been reduced to less than 25% of its peak level and we have created a new growth opportunity with the NetZero Mobile Broadband service, which will now be enhanced with the new Verizon and Sprint agreements."

The completion of the spin off is subject to certain customary conditions, including receipt of a ruling from the U.S. Internal Revenue Service as to the tax-free nature of the spin off, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, receipt of legal opinions, and final approval of the transactions contemplated by the spin off. There can be no assurance that the spin off will occur and, if it does occur, there can be no assurance as to its terms or timing.