CenturyLink's legacy services drag earnings down 5.2% amidst gains in broadband, business, IPTV

CenturyLink (NYSE: CTL) reported that its first-quarter 2012 revenue declined 5.2 percent, to $423 million, from $484 million in Q1 2011, a factor it attributed to ongoing declines in its legacy voice business.

As has been the case in previous quarters, the telco saw increases in strategic revenues--including high speed Ethernet-based business services, consumer broadband and Prism IPTV--being more than offset by declines in legacy voice revenues and access line loss.

The telco's Q1 operating revenues were $4.61 billion, up from $1.7 billion in Q1 2011. It attributed the increase to a $2.7 billion revenue contribution from its Qwest acquisition and $266 million from its Savvis purchase last July.

While adjusted net income was $423 million, down from pro forma adjusted net income of $484 million, it translated into earnings per share of 68 cents, surpassing analysts' forecast of 59 cents per share.

Here's a breakdown of their key operating metrics:

  • Business Markets Group (BMG): Buoyed by strong sales of high-bandwidth services such as Ethernet, strategic BMG revenues were $450 million, up 3 percent over the same period a year ago. Overall, BMG generated $917 million in total revenue, down 1.3 percent from pro forma Q1 2011, a factor it attributed to declines in legacy service revenues and data integration revenues, which offset the growth of its high-bandwidth IP and Ethernet services. Another contributor to BMG's growth was Savvis, which reported 7.6 percent pro-forma, year-over-year managed hosting revenue growth. Savvis' operating revenues were $266 million in the quarter, a 3.9 percent increase from pro forma Q1 2011. Savvis hosting revenues were $202 million, up 5.8 percent from Q1 2011, including managed hosting revenues of $99 million, a 7.6 percent increase from the same period last year.

  • Regional Markets Group (RMG): RMG generated $2.20 billion in total revenues, down 4.1 percent from pro forma Q1 2011, reflecting the ongoing decline in legacy voice services and access lines. Broadband and IPTV, however, continued to be a strong growth engines for RMG. During the quarter, RMG added over 89,000 broadband Internet subscribers, reaching a total of 5.64 million subscribers at the end of the quarter. RMG also added nearly 15,000 new Prism IPTV subscribers, 55 percent of which were new CenturyLink customers, to end the quarter with almost 85,000 PrismTV subscribers.

  • Wholesale Markets Group (WMG): The growth drivers for WMG were strategic revenues for wireless backhaul and Ethernet, which rose 4.2 percent over Q1 2011, to $576 million. Like BMG, legacy-service declines continued to be a drag on WMG as revenues declined 4.2 percent from Q1 2011. However, it continued to build a foundation for Fiber to the Tower (FTTT) growth as it completed about 650 fiber builds, ending the quarter with almost 10,800 towers connected with its fiber.

Looking forward, CenturyLink has forecasted Q2 2012 operating revenue of $4.55 million to $4.60 million, while it is maintaining its full- year 2012 operating forecast of $18.2 million to $18.4 million.

Shares of the Monroe, La.-based telco were trading at $39.53, up $1.41, or 3.70 percent, in after-hours trading Thursday on the Nasdaq.

For more:
- see the earnings release (.pdf)
- here's FierceIPTV's take

Special Report: Wireline in the first quarter of 2012

Related articles:
Report: CenturyLink to deliver 100 Mbps VDSL2 service
CenturyLink increases broadband subscriber count, narrows access line losses in Q4 2011
CenturyLink doubles Qwest debt offer to $1.08B
CenturyLink realigns its business services unit

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