Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day ladies and gentlemen and welcome to the PRIMUS Telecommunications fourth quarter 2005 financial results conference call. [OPERATOR INSTRUCTIONS] I would now like to introduce your host, Mr. John DePodesta, Executive Vice President and Co-Founder. Sir, you may begin.
JOHN DEPODESTA, CHIEF LEGAL OFFICER, CHIEF CORP. DEVEL. OFFICER, EVP, SEC., PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED: Thank you very much, Matt. And good afternoon, ladies and gentlemen and welcome to PRIMUS' fourth quarter and full year 2005 financial results conference call and Webcast. I'm John Depodesta, Executive Vice President at PRIMUS. For those who have not had a chance to review the earnings release, it has been posted and can be viewed on our Website at www.primustel.com. Joining me from PRIMUS on today's conference call are Paul Singh, Chairman and Chief Executive Officer and Tom Kloster, Chief Financial Officer.
We will begin with formal remarks from management regarding the Company's fourth quarter and full year performance and recent developments. This will be followed by a question and answer session. Before we begin, please be advised that statements made by the Company during this presentation that are not historical facts are forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
These statements may include but are not limited to; revenue and earnings projections, statements of business plans and objectives and capital structure and other financial matters. Forward-looking statements may differ from actuality and relying on them is subject to risk. Factors that could cause forward looking statements in this presentation differ materially from actual results are discussed in the Company's Form 10-K and 10-Q and other periodic filings with the Securities and Exchange Commission. These filings may be obtained from our Website at no cost. The Company is not necessarily obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
I will now begin the management remarks. In reporting fourth quarter and full-year results, it seems an appropriate time to provide a bit of perspective. A year ago we had recently developed and deployed a number of new products; local services in Canada, broadband services in Australia and retail VOIP services in the U.S. and Canada; in an effort to enter growth markets and to create more attractive product bundles for our core long distance voice and dialup ISP businesses. However, 12 months ago those efforts were in their early stages of deployment. And in fact, we had just begun to embark on building out our broadband network in Australia.
While we were confident that our strategy was sound, we knew that substantial investment was required and that execution risk, compounded by intense and evolving competitive threats would challenge our progress. 12 months later, a different perspective emerges. A cautiously optimistic outlook has given way to a renewed confidence in our ability to succeed. The tangible manifestation of that change is the operating and financial results we report today. We knew that our 2005 strategy to transform the Company to enable it to offer bundled local and long distance voice and VOIP and broadband services would result in substantially declining operating income until we could attain sufficient scale in our key initiatives. And we cautioned you at the time.
We also made clear that we had targeted the fourth quarter of 2005 as the potential inflection point. And we have delivered. Importantly, the encouraging progress allows us to set our 2006 base line operating assumption at $60 million adjusted EBITDA. And we believe we can improve upon that target. Beyond the raw numbers, there are a number of factors that underscore the progress we have made over the past 12 months.
First, with respect to our major new initiatives in rolling out local services in Canada and broadband services in Australia, we are substantially through the costly startup phase. And have attained a sufficient level of scale to assure that additional customers are accretive. Second, the new products we have developed, local broadband, VOIP, have now been proven in the marketplace and provide substantial opportunities for growth. The only constraint is adequate cash to fully exploit the opportunity.
And third, with our new products and with an enhanced ability to bundle them together with our core voice services, we have substantially reduced our vulnerability. To be sure, competitive threats remain and will continually evolve but the point is, that today PRIMUS is substantially stronger and more capable than it was a year ago. As highlighted in our press release, with cash resources constrained, our primary objective in 2006 is to manage the business to maximize cash flow.
While prudent, we are fully aware that this approach falls short of maximizing the growth opportunities that are available to us from the new initiatives. That is why our principle focus during 2006 is to find ways to generate additional cash to fund the accelerated growth of these earning initiatives. Accordingly, we intend to explore the feasibility of a number of strategies including; continued cost cutting, selected asset sales, opportunistic equity capital infusions, external funding for LINGO and reducing interest expense through potential balance sheet deleveraging.
The latter two possibilities deserve further mention. We were very encouraged by the announcement yesterday of Vonage's proposed IPO. And we hope that their success will serve as a funding catalyst for other independent VOIP providers, including LINGO. Their filing has now made public the key operating and financial merits of their VOIP business. And I'm happy to report that LINGO's business model compares quite favorably.
The major constraint to the growth of lingo has been and …