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CenturyLink's CEO Sees Growth Ahead From A Business Unit Reorg And The Level 3 Communications Acquisition

CenturyLink reported disappointing earnings for Q4 2016, but is hopeful that it's tie-up with fellow telecom Level 3 will bolster business services sales into 2017.

CenturyLink CEO Glen Post said during Wednesday's earnings call that his company is "very excited" about its recent restructuring and the "new chapter" that begins when the Level 3 acquisition closes.

CenturyLink has recently restructured its organization into three groups: consumer, enterprise, and IT and managed services, as it prepares for the Level 3 business services sales boost. The Monroe, La.-based company took an earnings hit during the final quarter of 2016, but it expects the Level 3 deal to close by the end of Q3 2017.

[Related: CenturyLink Merger With Level 3 Gives Partners More To Sell In The Enterprise]

Post also touched on CenturyLink's sale of its data centers and co-location business for $2.15 billion to a group of funds advised by investment firm BC Partners announced in November.

"This aligns with our network-first focus that we are continuing as we move into 2017," he said. Post also noted his displeasure with carrier's fourth-quarter results.

"Total revenues were below our expectations due to slower growth in our strategic revenues than we anticipated coming into 2016. We are laser-focused on improving our trends going forward," he said.

Revenues for CenturyLink's Business Services segment during Q4 2016 were $2.55 billion, down 4.1 percent from $2.66 billion in Q4 2015. The company's strategic business revenues increased modestly in the fourth quarter by 1.1 percent to $1.23 billion, up from $1.22 billion a year ago. CFO Stewart Ewing said that growth in this segment was generated from high-bandwidth data services and VoIP revenues.

CenturyLink's legacy business services revenues continued its downward trend, dropping by 8.7 percent in Q4 2016 to $1.18 billion from $1.29 in the year-ago quarter.

CenturyLink expects the Level 3 merger to give its enterprise business segment a boost, according to said Dean Douglas, president of enterprise markets.

"We believe will see a nice ramp up of our revenues associated with our enterprise business," Douglas said. "We continue to enjoy nice performance improvements in our MPLS business, combined with our SD-WAN business."

CenturyLink said that after its combination with Level 3, it expects to earn 76 percent of its revenue from business customers.


For the quarter ending on Dec. 31, 2016, CenturyLink reported overall earnings per share of 8 cents, down from 62 cents a share in the year-ago quarter. Net income for the quarter also saw a sharp decline of 87.6 percent, to $42 million from $338 million a year ago. CenturyLink attributed these declines to severance costs and one-time expenses totaling more than $200 million related to its Level 3 acquisition.

Operating revenue was down during Q4, falling to $4.29 billion from $4.48 billion last year. Post attributed the drop to declines in legacy voice and low-bandwidth data services revenues.

CenturyLink's earning also missed the mark with Wall Street. Analysts predicted the carrier to reveal operating revenues of $4.32 billion and adjusted earnings of $0.57 per diluted share.

For the full year 2016, CenturyLink reported operating revenues of $17.47 billion, down 2.4 percent from $17.90 billion in 2015. Net income dropped 28.7 percent to $626 million to $878 million in 2015. Diluted earnings per share fell to $1.16 in 2016 from $1.58 in 2015.

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