CenturyLink's (NYSE: CTL) moves to acquire Qwest and Savvis resulted in some positive signs in Q4 2011 and the full year 2011, factors which may have pushed up shares in midday trading despite the telco missing analyst estimates for adjusted earnings per share.
For the fourth quarter, the telco reported operating revenues of $4.65 billion, nearly tripled from $1.72 billion in Q4 2010, a factor it attributes to the $2.73 billion and $260 million of revenue contributions from the Qwest and Savvis acquisitions, respectively.
However, the continued decline in legacy services such as traditional voice offset the increase in strategic services like wireless backhaul, IPTV and broadband. This factor drove down operating revenues 3.2 percent from $4.81 billion in 2010 $4.65 billion.
From a total year standpoint, CenturyLink reported that operating revenues doubled to $15.4 billion from $7 billion in 2010. At the same time, net income declined to $867 million in 2011 from $1.03 billion in 2010.
Analysts had predicted that CenturyLink would see an adjusted profit of 61 cents per share, but the telco reached only 55 cents per share in Q4. Still, the jump in operating revenues appeared to hearten investors. Shares rose 68 cents Thursday to $38.51 by midday.
While access line loss is an unavoidable reality for telcos like CenturyLink, it did reduce access line losses by over 30 percent between October and December 2011 over pro forma Q4 2010, and by more than 14 percent quarter-on-quarter.
At the same time, the telco saw strong gains in broadband subscriptions. At the end of 2011, it had 5.55 million subscribers, representing 4.5 percent annual growth over pro forma year-end 2010.
Here's a breakdown of the service provider's key metrics:
- Regional markets: By implementing its go-to-market strategies to increase the number of broadband subscribers, CenturyLink's Regional Markets Group (RMG) generated $761 in strategic revenues, up 5.8 percent from Q4 2010. However, the decline in legacy service revenue drove down overall revenues 3.9 percent to $2.2 billion. Broadband and IPTV were the shining stars in Q4 2011. During the quarter, it added 70, 000 new broadband subscribers and 16,000 new Prism IPTV customers.
- Business Services: Driven by Ethernet, wavelength and MPLS sales, Business Markets Group (BMG) generated $446 million in strategic revenues, up 2.8 percent over pro forma fourth quarter 2010. Total revenue, however, declined 3.3 percent to $947 million due to declines in legacy services and data integration revenues.
- Wholesale services: The wholesale market group (WMG) reported $564 million in strategic revenues, up 5.4 percent due to ongoing wireless backhaul sales and wholesale Ethernet. Overall WMG revenues declined 4 percent to $955 million, which reflect the decline in legacy services. Wireless backhaul continues to be a major priority for WMG. During the quarter it built out fiber to 1,250 cell towers, ending the year with almost 10,200 Fiber to the Tower (FTTT) builds.
- Savvis: Driven by managed hosting and cloud services, Savvis' operating revenues were $260 million in the quarter, up 3.6 percent increase Q4 2010. Savvis hosting revenues were $197 million, a 7 percent increase from pro forma Q4 2010, with managed hosting revenue of $98 million, an 11.8 percent increase from pro forma Q4 2010.
With the integration of the Embarq assets complete, the service provider said it's now on track to hit key integration goals for Qwest and Savvis in 2012.
From a financial standpoint, the service provider has forecast operating revenue between $18.2 billion to $18.4 billion for the full year 2012.
- see the release
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