CenturyLink's 4Q shines with growth in IPTV, enterprise services

CenturyLink (NYSE: CTL) reported on Wednesday that Q4 2012 operating revenues declined 1.5 percent year-over-year to $4.58 billion reflecting the trend of declining legacy services revenues being offset by an increase in both next-gen business and consumer broadband and its Prism IPTV services.

CenturyLink Q4 slides

Click here for details from CenturyLink's Q4 investor presentation.

Fifteen financial analysts polled by S&P Capital IQ anticipated sales of $4.59 billion.

The telco said it also narrowed its year-over-year rate of revenue decline to 1.5 percent in Q4 2012 versus 3.2 year-over-year decline in Q4 2011.

For the year 2012, the telco reported operating revenues of $18.4 billion, while operating cash flow, excluding special items, was $7.7 billion for 2012 compared to $6.5 billion in 2011.

"This continued improvement is driven by strength in our strategic products, including high-speed internet, Prism TV, high-bandwidth, our data services to enterprise customers and wholesale customers, and our hosting services," said Glen Post, president, CEO and director of CenturyLink, during the earnings call.

Here's a breakdown of the telco's key metrics:

Regional Markets: On the consumer side of the Regional Markets segment, CenturyLink added 41,000 new broadband Internet subscribers and over 10,000 Prism IPTV customers, ending the quarter with a total of 5.85 million and 115,000 subscribers, respectively. As seen in previous quarters, more than 90 percent of its Prism IPTV subscribers also purchased broadband service. It began a soft launch of Prism in one of the first legacy Qwest markets in Phoenix in the December with plans for a commercial launch in the first half of this year. Post said that the Phoenix market's "early results and impressions are favorable" and they "expect to enter a second legacy Qwest market in mid-2013." In addition to seeing a rise in next-gen consumer services, the telco also narrowed access line losses to 5.7 percent from 6.6 percent in the same period a year ago. Likewise, the sale of strategic business data services rose 3.6 percent to $914 million in the quarter.

Wholesale Markets: Fiber to the Tower (FTTT) was the big highlight of the wholesale division's results. During the quarter, CenturyLink completed about 1,175 FTTT builds, ending the year with over 14,700 fiber-connected towers. In 2013, the service provider expects to complete between 4,000 to 5,000 additional fiber builds. The ongoing FTTT builds enabled it to drive up strategic revenues to $572 million as wireless bandwidth expansion and higher Ethernet sales offset expected declines in legacy service revenue. However, overall wholesale revenues fell 5.5 percent year-over-year to $908 million due to the ongoing decline in copper-based DS1 revenue. Despite the legacy decline, Post said that they "anticipate that wireless bandwidth growth will result in expansion of Ethernet consumption reversing the current revenue compression by early 2014."

Enterprise Markets – Network: Driven by next-gen products such as MPLS and Ethernet, strategic Enterprise Markets – Network revenues were $346 million in the quarter, a 7.8 percent increase over Q4 2011. Taking out the impact of private line services, CenturyLink said "the adjusted growth rate was nearly 1 percent." Overall revenues for the segment were $671 million, an increase of 5.7 percent from fourth quarter 2011, reflecting what it said was growth in high-bandwidth offerings and data integration revenues. One of the key highlights of this division's growth in Q4 was Ethernet services, particularly Ethernet over Copper. Post said that "we continued to expand our Ethernet over Copper footprint which has increased over 80% in 2012 to over 700 Ethernet enabled central offices."

Enterprise Markets – Data Hosting: In this division, which mainly consists of its Savvis operations, revenues rose 12.7 percent year-over-year to $292 million. Two key areas of growth were colocation and managed hosting services. Colocation revenues rose 9.6 percent to $114 million, while managed hosting services rose 21.2 percent year-over-year to $120 million. The telco said that its acquisition of Ciber, a global IT outsourcing provider, in October contributed about $13 million in revenues. It also set a foundation for further growth by opening a new data center in Frankfurt, Germany and by releasing Savvis Symphony Cloud Storage and Savvis Symphony Database in Europe.

CenturyLink has forecast Q1 2013 revenue and operating cash flow to decline over Q4 2012 as legacy and data integration revenues continue their falloff.

CenturyLink's shares dropped 12.5 percent to $41.69 after trading finished on Wednesday on the New York Stock Exchange.  

For more:
- see the earnings release
- and the earnings transcript (reg req.)

Special report:  Wireline telecom earnings in the fourth quarter of 2012

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