CenturyLink Q2 revenue rises to $4.61B with increased broadband, business service sales

CenturyLink (NYSE: CTL) reported on Wednesday that Q2 2012 earnings rose year-over-year due to an uptick in both consumer broadband and strategic business services.

For the quarter, operating revenues were $4.61 billion, up from $4.41 billion in Q2 2011.

The service provider said the revenue increase was the result of $278 million of revenue contributions from the Savvis acquisition it completed last July in addition to consumer broadband and its emerging Prism IPTV service.

Of course, the revenue increases were offset by expected declines in legacy service revenue due to the impact of access line losses and lower access revenues.

Here's a breakdown of the service provider's key unit metrics:

  • Regional Markets Group (RMG): During the quarter, RMG reported $2.48 billion in total revenues, down 2.6 percent from Q2 2011, a factor it relates to legacy service declines. Alternatively, RMG strategic revenues rose 5.8 percent over the same period a year ago to $894 million. On the services side, it reduced access line loss by 22 percent as the line loss trend improved during second quarter 2012 to a 6.1% annual decline compared to a 7.4 percent annual decline in Q2 2011. Once again, the star performer in the RMG portfolio was broadband. It added over 18,000 high-speed Internet customers, ending the quarter with a total of 5.76 million subscribers. It also expanded the number of Prism TV subscribers by 11 percent in second quarter 2012 from first quarter 2012 and increased penetration of available homes in our markets to more than 9 percent.

  • Wholesale Markets Group (WMG): Like other telcos, CenturyLink reported that the wholesale segment saw "modest" revenue growth as fiber-based revenue offset expected decline in copper-based revenue. Driven by the fiber and Ethernet-based service sales to wireless operators, WMG's Q2 strategic revenues rose 2.1 percent over Q2 2011 to $572 million. During the quarter, it completed almost 1,350 fiber builds to cell towers and over 2,000 year-to-date, ending the quarter with about 12,150 fiber-connected towers. The service provider said it's "on track to complete 4,000 to 5,000 fiber builds in 2012."

  • Enterprise Markets Group (EMG) – Network Services: CenturyLink's EMG revenues were $333 million in the quarter, up 2.8 percent over Q2 2011 due to high bandwidth services sales. Driven by higher than anticipated strategic services growth in Ethernet and MPLS, overall EMG total revenues rose 2 percent over Q2 2011 to $648 million.

  • Enterprise Markets Group (EMG) - Data Hosting Services: EMG - Data Hosting, which consists mainly of Savvis' operations, reported that operating revenues rose 6.5 percent to $277 million due to the result of strong managed hosting (including cloud), and colocation services sales. To build a foundation for future revenue growth, it announced planned data center expansions in seven markets, including four that went live in Q2.

"As we enter the second half of 2012, we remain focused on investing in broadband expansion and enhancement, Prism TV, fiber-to-the-tower and managed hosting and cloud computing services in order to maximize the opportunities for future revenue growth," said Glen Post, CenturyLink's CEO and Chairman, in the earnings release.

Looking towards Q3 and the total year 2012, CenturyLink said that operating revenues will be "negatively impacted" by the decline in access revenues due to the FCC's USF/ICC Transformation Order.

It has forecast Q3 2012 operating revenue to come in between $4.54 to $4.59 billion and $18.3 to $18.4 billion for the full year 2012.

Shares of CenturyLink were trading at $43.42, up $1.40, or 3.33 percent, in morning trading on the Nasdaq stock exchange Thursday.

For more:
- see the earnings release

Special report: Wireline in the second quarter of 2012

Related articles:
CenturyLink extends North Carolina fiber network to 5 data centers
Savvis pays $7M for pieces of Ciber IT outsourcing business
FCC's Connect America Funding initiative leaves 13 states in the cold
UPDATED: CenturyLink gets $35M in FCC CAF funding for broadband expansion
CenturyLink gets green light to offer IPTV in Colorado Springs, Colo.

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