Tel-Save sees a return to profits

The telephone company that offers discount long distance service through AOL expects to see a profit this quarter for the first time in over a year.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
2 min read
Tel-Save.com, the telephone company that offers discount long-distance service through America Online, said today it expects to see a profit this quarter for the first time in over a year.

If the company lives up to its own projections, it will mark a fairly sharp turnaround. In its last earnings report in November, Tel-Save reported a loss of $1.58 a share, on revenue of $123 million.

But according to company officials, the year-long accounting hangover from its deal with America Online is coming to an end, allowing the company to get back into the black. Tel-Save had paid AOL $100 million in order to become the online giant's exclusive telecommunications advertiser--a fee that was paid over the course of this past fiscal year, said founder Daniel Borislow.

"Now that that payment is behind us, we expect positive results again," Borislow said.

Today's news may help boost Tel-Save shares, which have been struggling to regain strength from earlier in the year. The company's share price has crumbled from a 52-week high of 30 to trade in the teens in recent weeks, off a low of 4.7188 in October.

But analysts agree that the company is moving on the right track to profitability. Research from Bear Stearns shows that Tel-Save first recorded a profit last September, after the AOL deal was paid off and following an expensive direct mail marketing campaign to AOL members.

Borislow said the last year's sliding stock price and bad press related to the cost of the AOL deal had actually helped the company reduce its debt, allowing it to buy the notes back at about 50 cents on the dollar.

Borislow will leave the company at the end of this year, turning the reins over to departing Network Solutions CEO Gabriel Battista.

While the company currently relies on the AOL deal for almost all of its revenue, Battista is expected to expand Tel-Save's product offerings. The company has not yet made any announcements, but the newly-revamped Web site promises several new telecommunications services to be offered over the Net.