CenturyLink is finding that its broadband Price for Life program is simplifying the pricing structure for consumers, but with more customer losses in the fourth quarter, it’s clear that the service provider is trying to overcome a strong cable competitive push.
Jeff Storey, president and COO CenturyLink, told investors during its fourth-quarter earnings call that Price for Life is one of the key pillars in its broadband customer retention and acquisition strategy because it makes it simpler for consumers to purchase and consume the telco’s broadband and consumer products.
“In 2016, we put in a lot of promotions and discounts and what that feels like to the customer is these promotions and discounts roll off six months after they signed them,” Storey said during the earnings call, according to a Seeking Alpha earnings transcript. “They don't feel like, now the discount's gone, they feel like we gave them a rate increase. It’s not a very customer-friendly way to do it.”
Already, CenturyLink is seeing a greater amount of its broadband customers—including more of its sub-20 Mbps customers—adopting the Price for Life program.
“We rolled Price for Life less than six months ago and we have over 1 million customers on it already, so it's been very successful,” Storey said. “Our customers have reacted well to it and it makes the experience they have with us feel better for them.”
Despite the allure the Price for Life initiative could have over time, CenturyLink continues to shed more broadband subscribers—a trend that continued into the fourth quarter.
During the quarter, CentruryLink lost another 90,000 subscribers. The service provider lost about 140,000 customers that subscribe to 20 Mbps and lower speeds, but gained about 50,000 subscribers that purchased higher speed offerings with higher ARPU.
“On the consumer side, Price for Life and upgrading speeds to 100Mbps-1Gbps is bearing fruit,” Macquarie Research said in a research note. “The company lost 140k in the low end but added 50k on the high end. However, we continue to model net add losses as a result of competitive pressures from cable.”
Enhancing speeds, upgrading customers
As CenturyLink simplifies the pricing regime for consumer broadband, the provider plans to leverage and extend its even larger fiber footprint to bring higher speeds to more homes.
While the service provider did not provide any specific roll out targets for 2018, CenturyLink says it has plenty of room to extend 40, 100 and even 1 Gbps to more locations.
“We have opportunities to sell more high-speed or very high speed 100-megabit and above, 40-megabit and above,” Storey said. “We need to make sure that we're doing that.”
To fulfill broadband demand, Storey added that CenturyLink will continue to make targeted fiber network expansions across its wireline markets.
“We have plenty of footprint out there that we can go and sell,” Storey said. “We'll continue to deploy more in fiber into our network, getting it closer and closer to ... consumer customers and making that higher speed available to the larger footprint.”
At the same time, the service provider plans to make upgrades to enable higher speeds even if consumers continue to choose 40 Mbps. By having network facilities that could support up to 1 Gbps, CenturyLink says it creates a perception that the service provider can scale with its customers’ needs.
“We have a significant number of homes that are enabled with speeds between 100 megabits and a gigabit,” Storey said. “Even though most customers don't see the need for or used more than 40 megabits, we know we are more successful in selling when they have an upgrade path for the future.”
A mixed quarter
CenturyLink reported overall mixed results during the fourth quarter as legacy CenturyLink saw ongoing legacy services losses while Level 3 saw revenue improvements.
Here’s a breakdown of CenturyLink’s key metrics:
Business: In the Business segment, results were mixed with revenues of $4.41 billion, down slightly from $4.45 billion in the same period a year ago. While Medium and Small Business revenues declined to $874 million from $918 million, the company reported gains in Enterprise and International & Global Accounts which rose to $1.3 billion and $941 million.
Meanwhile, Wholesale & Indirect declined to $1.28 billion from $1.36 billion year-over-year.
Consumer: CenturyLink’s consumer segment continues to struggle to find a balance between legacy voice and lower speed broadband churn and next-gen adoption. CenturyLink reported that the Consumer segment revenues were $1.4 billion, down from $1.48 billion a year ago.
Regulatory: In the regulatory category, revenues rose year-over-year to $189 million, up from $176 million.
Financials: Consolidated total revenue was $5.32 billion for fourth quarter 2017, compared to $4.29 billion for fourth quarter 2016 and $17.6 billion for full year 2017 compared to $17.4 billion for full year 2016.
Level 3 itself saw another improved quarter with $2.02 billion in revenues, up from $1.93 billion in the same period a year ago due to an improvement in its North American Core Network Services business. For the year 2017, Level 3 reported $7.89 billion in revenues, up from $7.7 billion in 2016.