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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 telecoms, has been looking to offset its declining landline revenue with Internet services, which continue 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 is also pushing its Prism TV service as another growth driver. Roughly 60% of its households can get the service, and Chief Executive Glen Post said he expects to have the service available in 1 million households by the end of the year.

"We're pleased with the adoption of Prism," he said.

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. Post noted that the lower revenue came from lower access revenue, further line losses, and lower revenue from the universal service line fund.

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.

Qwest, however, said it typically sees a seasonal lull in the fourth quarter.

"Overall, I'm happy with the high-speed Internet world," Chief Executive Ed Mueller said in an interview.

Chief Operating Officer Teresa Taylor said the company wouldn't rock the boat on its investment in upgrading its network with fiber-optic lines as the company nears the close of the merger.

One of the key reasons 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 0.9% to $44.72, while Qwest fell 0.8% to $7.36.

-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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