On Sep 19, we maintained our Neutral recommendation on
). The company is characterized by a reformed business structure,
broadband expansion, faster fiber builds, better cloud computing
services and penetration of Prism TV into new markets.
However, deteriorating legacy voice and access revenues due to
wireless substitution remain significant risks to the carrier.
The leading landline operator holds a Zacks Rank #3 (Hold).
CenturyLink has redesigned its operating segments to
strengthen its grip over the market as well as remain fully
committed to wholesale, hosting and consumer customers. Owing to
its long-standing ties with clients by bundling of integrated
services, launch of new and attractive services, consistent
technology upgrades and infrastructure enhancement, the company
has witnessed slower rate of revenue declines.
The landline carrier is continuing with its fiber-to-the-tower
(FTTT) expansion, and remains on track to build 4,000 to 5,000
fiber towers in 2013. The fiber build will position the company
for long-term growth and reduce the current revenue compression
by early 2014.
CenturyLink is concentrating on expanding the business base of
its subsidiary Savvis and has recently completed the acquisition
of Platform-as-a-Service (PaaS) provider - AppFog Inc. The
acquisition will augment the product portfolio of Savvis as
AppFog's high-quality Platform-as-a-Service offerings along with
Savvis' industry-leading infrastructure base will likely create a
secure and reliable network for developers.
Additionally, the company continues to focus on data centre
expansion and plans to add 87,000 square feet of space within
2013 to generate higher revenues in collocation and managed
hosting and cloud services.
However, the company's core local phone business has slowed
considerably due to consistent decline in access lines.
Substitution of traditional wireline telephone services by
wireless and other competitive offerings and lower long distance
minutes of use are resulting in poor performances.
CenturyLink is facing problems in gaining market traction for
Savvis products, as some of its large clients are building their
own data centers, thus eliminating their exposure to Savvis.
Additionally, integration of Qwest and Savvis operations with
CenturyLink will increase operating costs going forward. Thus we
maintain a cautious view on the company.
Companies operating within the telecommunication sector that
are worth taking note of include
Hawaiian Telcom Holdco Inc.
Shaw Communications Inc.
). All the stocks currently carry a Zacks Rank #2 (Buy).
CENTURYLINK INC (CTL): Free Stock Analysis
HAWAIIAN TELCOM (HCOM): Free Stock Analysis
SHAW COMMS-CL B (SJR): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
To read this article on Zacks.com click here.