UPDATE: CenturyLink 4Q Profit Falls, Qwest Swings To Loss
February 15 2011 - 10:12AM
Dow Jones News
CenturyLink Inc. (CTL) posted a slight decline in its
fourth-quarter profit as the rural telecommunications provider
continues to lose traditional phone customers.
CenturyLink, like many of its fellow telcos, has been looking to
offset its declining landline revenue with Internet services, which
continues to see demand. To further guard against declines in its
legacy phone business, it agreed to acquire Qwest Communications
International Inc. (Q), which swung to a fourth-quarter loss due to
the same trends.
CenturyLink and Qwest are in the final stages of the deal, which
has cleared several state and federal regulatory hurdles but still
needs approval from the Federal Communications Commission and other
state agencies. The deal is expected to close in April.
Both companies are ceding traditional phone lines as consumers
swap out their fixed lines for cellphones. As a result, CenturyLink
said it has struck an agreement to sell Verizon Wireless services
to its customers, which begins this spring. While financial terms
weren't disclosed, Qwest already has a similar agreement with the
carrier in which it gets paid a monthly recurring fee for each
customer it signs up. Verizon Wireless is a joint venture between
Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD).
CenturyLink reported a fourth-quarter profit of $225.2 million,
or 74 cents a share, down from $230.2 million, or 77 cents a share,
a year earlier. Excluding acquisition costs and other impacts,
earnings fell to 76 cents from 95 cents a share as revenue dropped
6.4% to $1.72 billion.
The company in November forecast earnings of 73 cents to 77
cents a share on revenue of $1.69 billion to $1.71 billion,
estimates that were behind analysts' views at the time.
For the quarter, CenturyLink said the number of high-speed
Internet customers at year's end rose 7.1%, or 158,000, to 2.4
million from a year earlier, as total access lines fell 7.6% to 6.5
million.
The company also forecast a 2011 revenue decline of 4% to 5%.
Analysts polled by Thomson Reuters most recently projected a
revenue drop of 5% to $6.69 billion.
Qwest, meanwhile, reported a fourth-quarter loss of $161
million, or 9 cents a share, compared with a year-earlier profit of
$108 million, or 6 cents a share. One-time items including
stock-based compensation and merger costs took 21 cents a share off
the last quarter and 2 cents from the prior-year quarter. Revenue
declined 3.2% to $2.9 billion.
Analysts polled by Thomson Reuters had most recently forecast
per-share earnings of 10 cents a share on $2.9 billion in
revenue.
Qwest suffered declines in both its landline and DSL businesses,
although its high-speed Internet business continued to grow thanks
to stronger adoption of its fiber-optic-based service. It also
added 42,000 Verizon Wireless customers and 40,000 DirecTV Group
Inc. (DTV) customers through similar reseller agreements.
Barclays Capital analyst James Ratcliffe said the broadband and
wireless numbers were lower than expectations.
One of the key reasons that CenturyLink was interested in Qwest
was its stronger business presence, which Qwest has built up over
the past few years. Qwest's business markets division posted a 1%
increase in revenue over a year ago, showing better performance
than its larger peers Verizon and AT&T Inc. (T).
CenturyLink fell 0.8% to $44.79, while Qwest fell 1% to
$7.35.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com
-Tess Stynes and Drew FitzGerald contributed to this
article.
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