CenturyLink Expands Prism Networks

Zacks

One of the leading wireless providers, CenturyLink, Inc. (CTL), has expanded its Prism TV services to Chandler and Gilbert in Phoenix, AZ. The company also intends to cover the rest of the Phoenix area within the next couple of years. CenturyLink continues to invest strategically in key growth drivers like Prism TV expansion, which will serve as a major catalyst for revenue generation.

The company has progressed well in terms of Prism TV services by penetrating in up to 10% of its eight existing markets. Prism has enabled the company to counter higher churn rates. As a result, the company foresees a 350–400 basis point annual improvement in churn rates.

The company has targeted the launch of Prism services in the Qwest market in the near term and plans to debut in two of the Qwest markets by mid 2013. The company expects to spend $250 million per year for Prism expansion over a three-year period (2012–2015).

Besides, Prism TV, CenturyLink expanded its advanced broadband network services such as fiber-to-the-node (FTTN) access to approximately 7.0 million homes in 2012. The company is also boosting the enterprise segment with new offerings that include bundled services like voice over IP and IT services designed exclusively for SMEs.

In addition to product offerings, we believe the company’s advanced network build out will provide significant traction in the data services market. Given the company’s increased investment focus on network developments, it has managed to enhance broadband speed and currently covers 70% of its access lines under 6 MB speed, over 57% of lines under 10 MB and 29% under 20 MB.

These investments bequeath several additional benefits like greater scale of operations and increasing productivity, apart from providing the company with a competitive edge over larger telecom carriers like AT&T, Inc. (T) and Verizon Communications Inc. (VZ).

However, stiff competition from other low cost telecom operators like LEAP Wireless International Inc. (LEAP) and increased operating expenses resulting from the acquisitions may impede the company’s growth trajectory.

CenturyLink retains a Zacks Rank #3, implying a short-term (1–3 months) Hold rating.

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