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CenturyLink Considering Dumping Its Consumer Landline/Broadband Services

CenturyLink is considering getting out of the consumer landline and broadband business and instead focusing on its profitable corporate-targeted enterprise and wholesale businesses.

CenturyLink CEO Jeff Storey told investors on a quarterly conference call that the phone company had hired advisors that will conduct a strategic review of all CenturyLink products and services targeting the consumer market and is “very open” to the possibility to selling or spinning off its residential business, assuming it can find an interested buyer.

“Let me be clear, we’re early in what I expect to be a lengthy and complex process,” Storey told investors, noting the company’s first priority is to take care of its shareholders. “During our review, we will not modify our normal operations or our investment patterns. I can’t predict the outcome or the timing of this work or if any transactions will come from it at all. Our focus, though, is value maximization for shareholders. If there are better paths to create more value with these assets, we will pursue them.”

CenturyLink’s landline network is similar to those of other independent telephone companies. There are significant markets where extensive upgrades have introduced fiber broadband service and high-speed DSL, but most of CenturyLink’s network remains reliant on copper wire infrastructure that is not capable of supplying high speed internet to customers.

Like most large independent telephone companies, the majority of CenturyLink’s residential customers can only purchase slow speed DSL service offering less than 20 Mbps. A growing number of customers have canceled service after running out of patience waiting for upgrades. CenturyLink executives told investors last week the company is abandoning investments in bonded or vectored DSL upgrades, claiming anything other than fiber optics is not “competitive infrastructure.”

CenturyLink also admitted it is losing customers after deciding to shelve its unprofitable, competing Prism TV product. The only growth on the consumer side of CenturyLink is coming from significant broadband upgrades.

“In the first quarter, we saw a net loss of 6,000 total broadband subscribers. This quarter’s total was made up of declines of 83,000 in speeds below 20 Mbps and growth of 77,000 in speeds of 20 Mbps and above,” reported CenturyLink chief financial officer Neel Dev. “Within those gains, we added 47,000 in speeds of 100 Mbps and above. Voice revenue declined 12% this quarter. Going forward, we expect similar declines in voice revenue. As a reminder, the decline in other revenue was driven by our decision to de-emphasize our linear video product.”

Dev reported that 55% of CenturyLink’s customers have access to speeds of 20 Mbps or less, and the company has ceased spending marketing dollars advertising slow speed DSL. Instead, it “microtargets” service areas where customers can sign up for service faster than 20 Mbps.

Observers note CenturyLink’s interest in its landline business has been waning for some time. The change in attitude can be traced back to CenturyLink’s merger with Level 3, a very profitable provider of connectivity to the enterprise and wholesale markets. CenturyLink’s commercial services are consistently earning most of the revenue the company reports to shareholders every quarter, with residential services declining in importance.

A sale of CenturyLink’s local landline and consumer-focused internet businesses could be hampered because of the likely lack of buyers. Frontier Communications had been an aggressive player in acquiring landline networks cast off by Verizon and AT&T, but that company is now in financial trouble and faces major debt issues. It would be an unlikely bidder. Windstream is still in bankruptcy reorganization and an acquisition is out of the question. Smaller independent phone companies like Consolidated Communications (owner of former FairPoint Communications), also likely lack financing to achieve such a deal, especially as interest rates continue to rise. CenturyLink also has the option of spinning off its residential business into a new corporate entity, but would likely result in a financially hobbled enterprise that may have trouble attracting capital to continue funding further expansion.

Currently there are 4 comments on this Article:

  1. Big Bob says:

    As someone who has lived in a Century Link service area, I can confirm that they gave up on their residential business a looonnnggg time ago. I was able to sign up with Charter back in 2003 and was happy to tell Century Link what they could do with their overpriced service (and for those of you that think Charter is bad to deal with, they don’t hold a candle to Century Link…). I don’t think I’ve even received any form of promotional material from Century Link in a couple of years.

    It would make me very happy for Century Link to turn over my service area to someone else. It may be a crapshoot as to whether or not the new company would do any better, but it certainly would be hard for them to do worse. Perhaps we’d be lucky enough that whoever took over the service would actually be a real competitor to Charter/Spectrum.

  2. Nick says:

    Indeed. I also live in an area where the only competitor to Charter/Spectrum(and I use the term competitor quite loosely) is Century Link. Their website shows the best I can get from them is 6Mbps. I still sometimes get advertisements in the mail from them. I’m a bit surprised that they don’t even bother trying to compete on price. If they offered a dirt cheap $15/month plan, I would likely give it a go (still on the legacy TWC ELP Internet plan.)

    Story of much of the USA when it comes to ISPs, little to no competition. I wish my local power co-op would get in the ISP business.

  3. EJ says:

    Solid plan I guess. Take millions in CAF and taxpayer funds and do sub-par upgrades at best. Then when you see the gravy train coming to an end you bail out and sell. You are going to have to sell it super, super cheap. Do all in these areas a favor and sell to a municipality or COOP or give it away and write it off. Give it to someone that will do something with it.

  4. L. Nova says:

    Blame Wall Street and their relentless greed led by people such as Craig Moffett who have hissy fits when companies such as Verizon want to spend the money to upgrade all of their wireline to fiber yet are held back because Moffett tells investors that they will not get quick returns.

    I wish there was a way to eject guys like Moffett into the vacuum of space.







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