CenturyLink to bring 1 Gbps broadband to 700,000 homes by end of year

CenturyLink (NYSE: CTL) has set an aggressive goal with its 1 Gbps fiber-to-the-premises (FTTP) initiative, signaling that it plans to reach 700,000 residential homes with the service by the end of the year.

Glen Post, CEO and chairman of CenturyLink, during the earnings call confirmed it will continue to drive service into the 10 markets it announced so far.

"We continue to expand our gigabit footprint to residential customers in select cities, including some of our larger markets," Post said. "We expect to have gigabit services to about 700,000 residential consumers by the end of 2015 and that will be followed by further expansion in 2016 and beyond."

Post said that it has continued to see strong subscriber adoption of FTTP services in the markets where it's currently available.

"In the consumer segment, we continue to see good results in those markets where we have deployed higher bandwidth and IPTV services," Post said. "In our early GPON markets like Omaha, the take rates are exceeding our expectations."

At the same time, the telco is making progress with its Prism IPTV and broadband services overall.

CenturyLink reported that during the first quarter it added about 8,000 Prism TV customers, increasing penetration of the approximately 2.4 million addressable homes to 10.2 percent, but legacy voice line losses continued to eat into total consumer revenues. It ended the first quarter with a total of 249,000 Prism TV subscribers, up year-over-year from 199,000 subscribers in the same period a year ago.

The service provider also added more than 35,000 high-speed broadband Internet customers, ending the quarter with a total of 6.12 million subscribers.

"We believe that strength in products such as high-speed Internet, high bandwidth data services, and Prism TV remains a key growth driver for the company," wrote Zacks Equity Research in a research note. "In addition, a realigned business structure is likely to reap beneficial results in the coming quarters."

Despite the gains in broadband and TV services, the service provider continues to suffer through TDM growing pains as it continued to shed traditional access lines. It ended the quarter with a total of 12.3 million access lines, down from 12.9 million in first quarter 2014.

"On the downside, deteriorating legacy voice and access revenues owing to wireless substitution, intense competition, federal regulations and labor issues might weigh on the quarter's performance," Zacks wrote.

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

Consumer: In the consumer segment, the telco reported that an uptick in broadband Internet and Prism TV customers along with select price increases drove up strategic revenues 5.1 percent year-over-year to $738 million. Total consumer revenues were $1.5 billion, down slightly from $1.51 billion in the same period a year ago due to expected declines in traditional voice service revenues.  

Business/Wholesale: Driven by strong demand for high-bandwidth data services such as MPLS, Ethernet and wavelength services, strategic business revenues rose 0.8 percent to $1.58 billion. These gains were partially offset by what CenturyLink said were declines in low-bandwidth data and hosting services revenue. Hosting services revenues were $318 million, down from $328 million in the same period a year ago.

The company said that high-bandwidth data services grew more than 11 percent over the first quarter of 2014 driven by continued strength in customer demand.

Overall business revenues were $2.7 billion, down 2.8 percent year-over-year from the first quarter of 2014, as lower legacy, low-bandwidth data services and data integration revenues were partially offset by growth in high-bandwidth offerings. During the quarter, legacy voice services were $671 million, down from $711 million, while low-bandwidth data services declined to $533 million.

Total first-quarter operating revenues were $4.45 billion, including core revenues of $4.06 billion. Looking toward the second quarter, CenturyLink has forecast that operating and core revenues will be flat to slightly lower when compared to the first quarter of 2015.

In addition, the company expects second-quarter 2015 operating cash flow is expected to be lower compared to the first quarter of 2015 primarily due what it says is "higher employee-related expenses and the impact of the continued decline in higher-margin legacy revenues."

Shares of CenturyLink closed at $35.51, down 51 cents or 1.42 percent, at the end of Tuesday afternoon trading on the New York Stock Exchange.

For more:
- see the earnings release
- see this report

Special Report: Wireline telecom earnings in the first quarter of 2015

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