CenturyLink's strategic business revenues increase 6.7 percent to $655M, sees gains in MPLS, Ethernet

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CenturyLink (NYSE: CTL) reported that strategic business services continued to be a key revenue driver in the first quarter of 2014, rising 6.7 percent year-over-year to $655 million due to gains in MPLS and Ethernet services.  

Overall business revenues were $1.56 billion, up 3.6 percent year-over-year as the growth in high-bandwidth offerings and data integration revenues offset lower legacy services revenues. Data integration revenues were $35 million higher in the first quarter of 2014 compared with the first quarter of 2013.

However, there were some declines in the segment. The telco said its business segment margin was 38 percent, down from 43.1 percent in the same period a year ago due to what it said was "higher costs related to business revenue growth such as CPE, facility and sales and marketing costs, along with the impact of certain favorable one-time expenses experienced in first quarter 2013 and the decline in legacy revenues."

Looking towards the second quarter, CenturyLink said it also saw strong sales momentum going into the second quarter and early success with its new Managed Office solutions.

"We are pleased with the early success of our Managed Office product suite launch, as well as the continued strength in multi-site MPLS sales," said Glen F. Post III, CEO and president, in the earnings release.

The telco also saw similar gains in both strategic consumer and wholesale segment revenues.

Similar to earlier quarters, the consumer segment continued to be driven by broadband and Prism TV subscriber additions. During the quarter, CenturyLink added about 24,000 Prism TV customers, increasing penetration of the more than 2 million addressable homes to nearly 10 percent. It also added nearly 66,000 high-speed Internet customers, ending the period with more than 6 million customers in service.

Strategic consumer revenues were $702 million in the quarter, an 8.8 percent increase over the first quarter of 2013. However, total consumer revenues remained flat at nearly $1.51 billion, which reflected growth in strategic services offset by the continued decline in legacy services.

In the wholesale segment, the story continues to center around fiber to the tower (FTTT) services. It ended the quarter with over 19,200 fiber-connected towers, up nearly 24 percent from the first quarter of 2013.

While Ethernet-based FTTT services are its growth engine, strategic revenues remained flat year-over-year at $570 million as increases in wireless carrier bandwidth demand and Ethernet sales were offset by declines in copper-based revenue.

Overall wholesale revenues declined 4.9 percent to $862 million year-over-year due to the ongoing decline in legacy revenues, primarily driven by lower long distance and switched access minutes of use, along with access rate reductions from implementation of the CAF Order(6).

During the quarter, the telco extended fiber to about 395 towers, but lowered the annual fiber build estimates to 2,500 to 3,000 for full-year 2014 due to customer decisions to defer certain sites into 2015.

From an overall revenue standpoint, CenturyLink reported revenues of $4.11 billion, nearly flat year-over-year, compared with a 2 percent year-over-year decline in the first quarter of 2013.

Looking toward the second quarter, CenturyLink forecast revenues and operating cash flow to be impacted by lower data integration revenue and ongoing legacy revenue declines. It expects to report operating revenues of $4.48 billion to $4.53 billion and core revenues of $4.07 billion to $4.12 billion.

Shares of CenturyLink were listed at $34.65 in Thursday morning trading on the New York Stock Exchange (NYSE).

For more:
- see the earnings release
- here's FierceCable's take

Special report: Wireline telecom earnings in the first quarter of 2014

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