The third largest telecommunication company in the U.S.,
) received $35 million from the Federal Communications Commission's
(FCC) Connect America Fund (CAF) for deploying broadband services
in rural areas. With the given fund the company expects to serve
nearly 45,000 households.
The company has also been granted funds worth $1.9 million for
providing broadband services to 6,300 unserved households in
In 2011, the FCC reformed its USF (universal service fund) and
intercarrier compensation (fees that carriers pay each other when
they connect telephone calls) rules. The FCC highlighted its
efforts to expand high-speed Internet services to rural areas over
the next six years (2012-2018).
Based on these reforms the FCC introduced CAF that involves a
six-year transfer process of funds from USF, eventually, ending
USF's High-Cost program by 2018.
Under the new CAF, the company was eligible for receiving around
$90 million in Phase I funding, which was curtailed due to
limitations over using phase 1 fund. Although, the company expects
these limitations to restrict deployments across several areas
under its plan, it also aims to focus on high cost regions that
lack affordable Internet services.
We believe CenturyLink will continue to invest strategically in
the primary four levers over the next few years. This would serve
as major catalysts for revenue growth. These drivers include
broadband expansion and enhancement, fiber-to-the-tower (FTTT)
initiatives, managed hosting and cloud services, and IPTV offering
known as Prism TV.
The company is on track with its target of spreading advanced
broadband network services such as fiber-to-the-node (FTTN) access
to 7.1 million additional homes by the end of the year.
Currently, the company has covered 6.3 million units under its FTTN
Further, the company created a new offering for higher-speed
Ethernet, bundled with voice over IP and IT services designed
exclusively for SMEs. We believe that the advanced network
build-out will enable the company to offer competitive broadband
products and services.
With the Savvis acquisition, CenturyLink's marked its entry into
the cloud computing business, which is growing by leaps and bounds.
The acquisition strengthened CenturyLink's footprint in the hosting
managed cloud services business to 51 data centers in North
America, Europe and Asia. The company continues to expand data
centers this year with a view to generate higher revenue growth in
managed hosting and cloud services.
Further, CenturyLink plans to launch IPTV services in two new
markets this year with more in 2013 through 2015. The company
expects to spend $250 million per year for IPTV expansion over the
three-year period (2012-2015).
However, intense competition from top telecom carriers like
Verizon Communication Inc.
) along with continuous loss of customers and lower minute's usage
will act as headwinds going forward.
We maintain our long-term Neutral recommendation on CenturyLink
Inc. The stock also has a Zacks #2 Rank, implying a short-term Buy
CENTURYLINK INC (CTL): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.