Tags: CenturyLink | telecom | shakeup | CTL

CenturyLink Among Survivors of Massive Telecom Shakeup

By Greg Brown   |   Monday, 13 Aug 2012 04:12 PM

CenturyLink (CTL) is among the survivors of the massive shakeup in the local telephone business that began in the mid-1990s and still reverberates through the industry today. It has since expanded through acquisitions, becoming as much an Internet provider as a phone company and paying a strong dividend to boot.

CenturyLink is an integrated communications company engaged primarily in providing an array of communications services to our residential, business, government and wholesale customers.

Its communications services include local and long-distance, network access, private line (including special access), public access, broadband, data, managed hosting (including cloud hosting), colocation, wireless and video services. In certain local and regional markets, CTL also provides local access and fiber transport services to competitive local exchange carriers and security monitoring.

Based on total access lines at Dec. 31, 2011, CenturyLink was the third-largest telecommunications company in the United States. It operates almost 75 percent of its total access lines in portions of Colorado, Washington, Arizona, Minnesota, Florida, North Carolina, Oregon, Iowa, Utah, New Mexico, Missouri and Nevada.

CTL also provides local service in portions of Idaho, Ohio, Wisconsin, Virginia, Texas, Pennsylvania, Montana, Alabama, Nebraska, Indiana, Arkansas, Tennessee, Wyoming, New Jersey, North Dakota, South Dakota, Kansas, Michigan, Louisiana, South Carolina, Illinois, Georgia, Mississippi, Oklahoma and California.

“In the portion of these 37 states where we have access lines, which we refer to as our local service area, we are the incumbent local telephone company. We also operate 68 data centers throughout North America, South America, Europe and Asia,” management said in a recent filing.

CenturyLink has a market cap of $26.64 billion in a sector, diversified telecommunication services, where the average company size is $14.36 billion. Its trailing 12-month P/E ratio is 50.33 and its five-year projected price-to-earnings-growth (PEG) ratio is 5.32, compared to 3.34 for the sector.

Its projected earnings per share growth for the coming year is negative 0.41 percent, compared to a sector average of 7.20 percent.

Free cash


Analysts are generally positive on CTL, with buy or outperform calls from Jefferies, Raymond James, Jefferson Research and Smith Barney.

“We think CTL is making good progress in narrowing access line losses and achieving merger synergies, though we still see some pressure on its profitability. We believe the dividend, yielding an above-average 6.7 percent, is well supported by free cash flow,” Standard & Poor’s analysts wrote on Aug. 9, reiterating a hold rating while raising its target price to $41.

CenturyLink next reports on Oct. 31.

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