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CenturyLink Inks Massive Deal (revised)

Zacks Equity Research

CenturyLink, Inc. (CTL) recently inked a deal worth $233 million with Social Security Administration (:SSA) to provide data network support to the latter for the next five years.

SSA operates globally through 1,500 offices located across different countries and has massive head count of approximately 62,000. So CenturyLink will enhance the service quality of SSA by means of providing better network infrastructure for data, video and voice services to the SSA.

In 2008, SSA awarded a voice service order to Qwest, which was then acquired by CenturyLink in 2011. The acquisition will facilitate SSA’s internal communications by means of audio and video conferencing.

Although CenturyLink makes huge investments (expected to be in the range of $2.6–$2.8 billion this year), it maintains a high-quality balance sheet, superior cash flow and offers healthy returns to its shareholders through dividend payments. Moreover, continuous acquisition coupled with the roll out of fiber-to-the-node (FTTN) access to additional 1 million homes by the end of the year will help the company to expand its IPTV markets.

However, intense competition from top telecom carriers like AT&T (T) and Verizon Communication Inc. (VZ) along with continuous loss of customers and lower minute’s usage will act as headwinds going forward. We thus maintain our long-term Neutral recommendation on CenturyLink Inc.

Currently, CenturyLink has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Based in Monroe, Louisiana, CenturyLink Inc. is the third largest telecommunications company in the U.S. It provides a range of communications services, including local and long distance voice, wholesale network access, high-speed Internet access, managed hosting and collocation services, other data services and video services.

(We are reissuing this article to correct several mistakes. The original article, issued June 15, 2012, should no longer be relied upon.)

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