CenturyLink CEO Pledges To 'Do The Right Thing' Following Lawsuits And Fraud Accusations

CenturyLink's CEO Glen Post addressed the elephant in the room right away during the company's second quarter 2017 earnings call on Wednesday evening: pending litigation.

Last month CenturyLink was accused of conducting unfair and fraudulent billing practices when a former employee filed a wrongful termination lawsuit after being fired. The following week, a class-action suit was filed against CenturyLink seeking damages as high as $12 billion for its consumer customers.

"I want to be very clear, the allegations contained in the lawsuits are contrary to everything I believe we stand for, and does not represent our principles [or] our values," Post said.

[Related: CenturyLink Bundles Network, Management, SD-WAN Platform In New Hybrid SD-WAN Service]

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CenturyLink's 25-year CEO said that the carrier is taking these allegations very seriously, and stressed that it has pointed a special committee to conduct an independent investigation. Post doesn’t expect this review to wrap up until Q4.

"Sometimes we do make mistakes just like anyone else … whatever is found in the investigation of these matters, we will do the right thing," Post said.

CenturyLink announced a slew of leadership changes in June, which Post also addressed during the call. He confirmed that he still plans on stepping down in 2019, and Level 3 Communications' current president and CEO Jeff Storey will become CEO of the newly-combined company. The companies still expect the $34 billion acquisition of Level 3 to be completed by the end of September.

June proved to be a busy month CenturyLink, which revealed that the freshly-merged company will be organized into five business units, including strategic enterprise; federal government and state government; global accounts management and international; small and midsize business, and local government and education; wholesale and indirect; and consumer. Moreover, each president overseeing the new business units will be naming their leadership team, which could include a change to CenturyLink's current channel leadership lineup.

Overall, CenturyLink's Q2 financials were heavily impacted by one-time charges related to the sale of the data centers and colocation business, according to the Monroe, La.-based carrier.

Enterprise revenues declined 9 percent to $2.22 billion from $2.43 billion in the year ago quarter, which the provider attributed to revenue reduction associated with the sale of its data center assets, as well as a decline in legacy IT revenues.

The bright spot in CenturyLink's business segment was within its enterprise strategic services unit, which includes high-bandwidth data services, managed services, and SD-WAN packages. Strategic enterprise service revenues grew 5 percent year-over-year.

Post said that CenturyLink is also seeing growth in the small to midsized business (SMB) space. CenturyLink added more than 2,000 new MPLS customers during the quarter, with the majority being SMB customers.

In a move to capture more of this business segment, CenturyLink on Monday rolled out a new Business VoIP service. The pre-configured CenturyLink Business VoIP for small businesses offer a CenturyLink-managed voice service a flat monthly rate for customers. The service is not yet available through channel partners, but CenturyLink expects to extend the offering to its partner base in 2018, a spokesperson for the provider told CRN.

Consumer revenues declined 6.2 percent to $1.40 billion during the quarter, due to declining legacy voice revenues and lower broadband and video revenues. David Cole, CenturyLink's executive vice president of operations support and controller, said that those numbers are being driven by increased cable competition and the impact of the restructuring of a satellite video contract during Q1.

For the quarter that ended June 30, operating revenues in the second quarter were $4.09 billion, a decline of 7 percent compared to $4.40 billion in the year-ago quarter. Like in its enterprise segment, Cole attributed the drop to declining legacy revenues and revenue reduction due to its colocation sale.

The carrier earned $0.03 diluted earnings per share compared to $0.36 per share a year ago. CenturyLink said that its colocation sale impacted its earnings per share by $0.21. Net income for the quarter was $17 million, a decline of 91 percent compared to $196 million during the second quarter of 2016. Net income was also negatively impacted by approximately $115 million because of one-time charges related to its colocation sale, CenturyLink said.