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CenturyLink Suffers More Broadband Pains

Alan Breznick

Despite rolling out gigabit service in its biggest markets and boosting its broadband speeds overall, CenturyLink is still shedding data customers at a high rate because of fiercer cable competition.

CenturyLink Inc. (NYSE: CTL), the third largest US telco by subscribers, reported this week that it dropped another 77,000 consumer broadband subscribers in the second quarter, accelerating its string of quarterly sub losses. The provider closed out June with close to 5.9 million data customers, down 122,000 from nearly 6.0 million a year earlier.

The latest broadband losses come as CenturyLink continues to underperform even its own expectations and underwhelm investors. As a result, the company's stock price continues to slide, like that of other US rural incumbents. (See CenturyLink Posts Lackluster Q2 and Investors Flee US Rural Incumbents.)

Speaking on their earnings call late Wednesday, CenturyLink executives blamed their higher-than-expected data sub losses primarily on stiffer cable competition. They cited both gigabit service rollouts and more aggressive broadband pricing offers by MSOs in their territories. Among others, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. , Cable One Inc. and Mediacom Communications Corp. have all been rolling out 1 Gig or faster service in CenturyLink's far-flung, largely rural and exurban territories.

CenturyLink officials also noted that they've eliminated several low-priced broadband offerings, tightened up credit standards and discarded higher-churning sales channels over the last two quarters. While those moves have depressed broadband sales further, officials say they've also helped the telco cut its high customer churn rate.

"Our churn looks great," said Maxine Moreau, president of consumer markets. "We want to continue that going forward."

Thanks to such moves, CenturyLink's consumer broadband revenues didn't slump as badly as might have been expected in the second quarter. But they still came in 3.1% lower than a year ago, falling to $661 million from $682 million.

The telco fared even worse on the video side, reporting that its other strategic consumer revenue (which is primarily video) dropped 9.3% from the year-earlier period, slipping to $107 million from $118 million in spring 2016. Company officials blamed that decline largely on the restructuring of their satellite TV resale agreement with DirecTV. For the second straight quarter, CenturyLink, which ended 2016 with 325,000 IPTV subscribers, did not break out its Prism TV IPTV subscriber and revenue numbers.

Want to know more about video and TV market trends? Check out our dedicated video services content channel here on Light Reading.

Hoping to re-stoke its pay-TV business, CenturyLink is now delving into the OTT video market. In late June, the company launched a beta trial of a new skinny bundle service, CenturyLink Stream, in a number of markets. With the launch, company officials aim to offer more video programming options for current subscribers and appeal more to non-subs. (See CenturyLink Joins Streaming Parade and CenturyLink Preps for OTT Plunge.)

But, unlike other service providers doing the same, CentiryLink's commitment to the new streaming video bundles, which cost as low as $40 a month for nearly 50 channels, still seems less than firm. On the earnings call this week, company executives indicated that they might junk the new service if they could strike a deal to distribute another skinny bundle service instead.

"We have flexible packaging, including a lot of on-demand local broadcast, national channels, got some genre additions," said Glen Post, the company's CEO and president. "But we are very open to looking at other options… As a matter of fact, we continually talk to some of these other providers."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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User Rank: Light Sabre
8/7/2017 | 12:08:12 PM
Re: It could be worse
Occam's Razor.

The unifying theme is cash. As in "cash is king". VZ dumped all those properties to Frontier and Fairpoint because they needed cash for the AOL and Yahoo transactions, plus finishing out the LTE build-out. I'm sure that they'd have hung on to just the fiber assets if they could. All those copper assets are a huge cash sink, just as they need cash for densification, 5G and copper retirement. As to the buyers, the greater fool principle applies here.

WOW needs cash because they are over-leveraged from their Knowlogy acquisition. VZW is the largest customer for the Chicago fiber assets, so better for them to convert them to cash rather than milking them. Besides, those kinds of metro-wholesale assets are not quite WOW's core business (and IIRC, they don't even have cable service in that area). VZW's fiber needs are insatiable, and  it makes more sense to buy than build outside their Northeast footprint.
User Rank: Light Sabre
8/5/2017 | 12:38:10 PM
Re: Narrative appeal

Truer words were never spoken...or in this case written.  




User Rank: Light Sabre
8/5/2017 | 10:21:33 AM
Re: Narrative appeal
Jim -- Part of the problem is the self-comparison to companies like AT&T and Verizon. If CenturyLink, Frontier, et al. think there's a future in the markets they serve, then they need to focus on strategies to meet demand in those markets, rather than try to match what's going on with other CSPs that are simply out of their league. For starters, they absolutely need mobile broadband, either through an acquisition or a partner. If they don't think there's a viable future in the markets they serve, then they are screwed, and they pretty much did it to themselves.
User Rank: Light Sabre
8/4/2017 | 8:00:50 PM
Re: Narrative appeal

Its real simple...it is cheaper to do a DOCSIS 3.1 upgrade than a FTTH upgrade.  That means that the telcos can't keep up in residential wireline service without extra spending, especially in rural areas where there is little to no Enterprise business.  Why do you think Verizon dumped what it did (in 3 buckets - 1 to Fairpoint and 2 to Frontier)?

Century has some properties in Vegas and US West Territory that are quite good, but US West was a disaster.  So, they are behind the upgrade curve there.  I agree with Carol they are trying, but they are starting way behind the transformation we see at Verizon and AT&T.

The other problem is that the smaller the carrier, the more difficult it is too offer advanced IT services that would lead it to offer more MSP type services.









User Rank: Light Sabre
8/4/2017 | 2:51:36 PM
Narrative appeal
It seems as though we've settled on a narrative here -- that "rural" telcos are dying a not-as-slow-as-before death. Facts are then trotted out selectively to support that narrative. Sometimes this leads to confusion -- such as, if these markets are moribund, then what accounts for the increased competition? It's too bad that so many of these stories are viewed only from the Wall Street perspective.
User Rank: Light Sabre
8/4/2017 | 2:40:23 PM
It could be worse
Look at Frontier and now Winstream, CenturyLink could have been worse had it not been proactive such as the soon to be merger with Level 3. I don't follow Cinci Bell and am surprised with its performance. It too though has been doing a lot of work to stay alive. Shentel has a wireless component and Shoretel got bought out.

This telecom/cable super sector is undergoing a lot of changes, disruption and deflationary pressure. Even outfits like Akamai need to do a lot more to stay relevant.

I am interested in what folks here think about Verizon buying fibers from WOW. The latter has just gone through an IPO recently. Why is it selling hard asset? Good or bad? Verizon is a mixed bag. Dumping some asset on Frontier was smart if ruthless; otherwise, it is spinning in circle of sort. Maybe AOL's Armstrong could combine it with Yahoo! to make this segment at least cash flow positive to fund other divisions, but Verizon's orginal goal of making itself purely wireless may undergo some revision
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