CenturyLink will take the crown as the second largest enterprise services focused provider, trailing only AT&T when it completes its acquisition of Level 3 Communications next year. With that in mind, the service provider wants to enhance its consumer unit to better respond to residential customer needs.
Upon completing the acquisition, nearly 75% of CenturyLink’s revenue will be business services, with the remaining 25% coming from consumers.
This new revenue mix has raised questions as to whether CenturyLink could divest the consumer unit or pieces of it.
Stewart Ewing, CFO of CenturyLink, told investors during the UBS 44th Annual Global Media and Communications Conference that it sees upside in maintaining and driving further growth in the consumer unit.
“The consumer business is important to us and provides good cash flow and provides scale for us and its rides over one network,” Ewing said. “We looked at the potential to split some of it off and the other issue you have with that is any regulatory give backs associated with getting the approvals to be able to do that.”
Reigniting consumer leadership
Going forward, CenturyLink is considering appointing an executive that would be focused solely on the consumer segment.
“Today we have one person that’s responsible for both enterprise and consumer,” Ewing said. “I think we could bring more of a focused effort to consumer in our company by potentially having a leader of the consumer business.”
However, other than saying it could look at an internal candidate, Ewing did not not provide any specific details on who would lead the consumer unit.
“We are discussing a consumer leader internally as potentially part of the way to integrate Level 3, but we have not made any decisions on that yet,” Ewing said. “We will have somewhat more focus on consumer because we don’t want the fact that we will be 75% enterprise to really completely take our eye off the consumer business.”
Growing broadband speeds
A key part of the consumer growth for CenturyLink will be on continually increasing broadband speeds.
However, the telco has been seeing challenges in the broadband subscriber base as customer churn has rose in recent quarters as it the telco has tightened its credit policies.
During the third quarter, the service provider lost 65,000 subscribers as it focused its efforts on attracting higher-paying triple play customers.
CenturyLink is seeing customer broadband additions have started to increase in recent months.
“We have seen improvements on a monthly basis through October and we’re hopeful that can continue,” Ewing said.
By upgrading its existing copper plant with a mixture of VDSL2 and vectoring as well as expanding FTTH into more areas, it will be able to attract and retain more broadband customers.
Within the next two years, CenturyLink plans to equip more of its customer base with higher speeds that are dedicated to each user. Over the next two years, CenturyLink said 70 percent will be able get 100 Mbps or better in the top 25 markets it serves.
“Even a Brady Bunch type family with everyone using video streaming and gaming, 60-80 Mbps at the home is plenty of capacity,” Ewing said. “Our network can deliver that on a basis of that’s the speed you’ll get, unlike the cable networks whose speeds are not as deliverable as advertised.”