CenturyLink (CTL) is the third largest telecommunications company in the United States in terms of lines served , behind only power players, AT&T (T – Free AT&T Stock Report) and Verizon (VZ – Free Verizon Stock Report). The company provides communications and data services to residential, business, government, and wholesale customers.
The origins of Century Link stem from Oak Ridge, Louisiana in the 1930s, when the company was known as The Oak Ridge Telephone Company. Then, in 1968, the company was incorporated as Central Telephone and Electronics and moved its headquarters to its current place of residence: Monroe, Louisiana. The company listed its ticker on the New York Stock Exchange in 1978. After a number of acquisitions, and facing some adversity through the early 1980s recession, the telecom began to experience some strength from the late 1980s and through the 1990s, continuing its run of acquiring smaller telecom companies and security corporations to expand its services. After selling off its wireless business in 2002, to become a pure rural local exchange carrier, the company was operating in 22 states with over 2.5 million access lines. However, it began its own wireless voice and data service in 2005 after buying up a large amount of fiber networks in the central region of the United States. After its $11.6 billion dollar acquisition of Embarq in 2008, the telecom rebranded itself as CenturyLink, which became its official moniker in 2010. The acquisition of Qwest would officially make it the third largest telecom provider in the country with 17 million access lines, five million broadband customers, and 1.4 million video subscribers through 37 states.
As a provider of telecom services, particularly in rural areas of the United States, CenturyLink has had outstanding success, especially in the shadow of other large competitors. However, to stay competitive, the company has expanded its service offerings over time to include entertainment engines such as cable TV under the Prism TV brand and satellite TV under DIRECTV (DTV). Prism TV is a fiber optic based IPTV (Internet protocol television) service that serves about 175,000 customers. Its markets include the states of Arizona, Colorado, Florida, Missouri, Nebraska, Nevada, North Carolina, and Wisconsin. This particular network has an advantage over copper networks in terms of speed and bandwidth capacity and are installed all the way to the home or business with speeds up to 1,000 megabits per second. Areas that are not able to utilize the fiber network likely use the fiber-to-the-node DSL network. In addition, the company offers satellite coverage under a co-branding agreement with DIRECTV, which allows CenturyLink to resell its video services.
In addition, CenturyLink also provides technology solutions and data hosting through its CenturyLink Technology Solutions division, formerly known as Savvis. The company currently operates about 55 data centers through North America, Asia Pacific, and Europe, and is looking to expand domestically. Too, in accordance with its expansion efforts, CenturyLink recently acquired Tier 3, a Seattle-based cloud management company. While these moves may augur well for the company’s enterprise platform, competition is quickly rising within the enterprise data-hosting industry, and CenturyLink will have its work cut out for it. Some of its larger competitors include tw telecom (TWTC), Amazon.com (AMZN), and Google (GOOG).
After experiencing a mixed year in 2013, CenturyLink is continuing to expanding its efforts to improve its cost structure by cutting expenses in certain poorly performing segments, including its Legacy Services business. While demand trends remain concerning for the time being, management has been driving improvement by expanding its wireless and data business. The recent fiber-to-the-tower rebuilding and efforts to improve its Prism TV offerings have likely ended, and capital expenditures should decline going forward, likely freeing up cash to spend elsewhere. However, as previously mentioned, competition remains a large issue for many of the company’s efforts. CenturyLink’s solid capital structure should help alleviate most pressures for the time being. Investors looking to purchase positions in this equity may want to carefully review our full-page report in The Value Line Investment Survey.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.