Less than two weeks ago, Qwest Communications (NYSE: Q) and CenturyTel, Inc. (NYSE: CTL) announced a merger that would result in CenturyTel owning 50.5% of the combined company for a deal valued at around $22 billion once Qwest’s debt was included. Qwest shares jumped on the news, and CenturyTel shares fell. Both stocks are up today following their earnings announcements this morning.
Qwest earnings included EPS of $0.02, compared with EPS estimates of $0.09. Qwest posted earnings per share of $0.12 in the same period a year ago. Excluding a charge for Medicare-related tax changes, Qwest’s earnings totaled $0.10 a share. Q stock revenues for the quarter totaled $2.97 billion, slightly higher than estimates of $2.94 billion.
CenturyTel, which is re-branding itself as CenturyLink, reported earnings including EPS of $0.93, up more than 13% from $0.82 in the first quarter earnings of 2009. CTL stock revenues nearly tripled to $1.8 billion, primarily on the addition of revenues from Embarq, which CenturyTel purchased last year from Sprint Nextel Corp. (NYSE: S). The Embarq contribution was $1.255 billion, while CenturyTel’s own operations brought in about $545 million, down from $635.4 million a year ago.
CenturyTel blamed the revenue decline on customer losses in its landline business. The company added 70,000 broadband customers in the quarter, but did not specify how many it lost other than to say access lines subscriber numbers fell 8.4% compared with a year ago while high-speed Internet subscriber numbers rose 8.9%.
Qwest landline subscriber numbers fell 11% compared with a year ago, but both broadband and wireless subscriber numbers increased. Still, wireless subscriber numbers total only 922,000 out of more than 285 million total US subscribers
Wireless phones and smartphones are the growth areas in telecommunications, and the Qwest-CenturyTel tie-up claims less than half a percent of US subscribers. The uptick in broadband and high-speed Internet is good, but the competition in that business will get tougher. But the main problem is that landline subscribers are on the endangered species list and there is no turning back from that.
CenturyTel offered second quarter guidance of revenues in the range of $1.745-$1.775 billion and diluted EPS of $0.81-$0.85, pretty much in line with current analysts’ expectations. For the full year, CenturyTel is saying that operating revenues will decline less than previously projected by about a percentage point and that EPS will rise from $3.10-$3.20 to $3.20-$3.30.
Qwest is also guiding revenue losses to be less than previously projected. The company said that it now expects declines to improve to a “low- to mid-single digit rate by the fourth quarter.” That’s what passes for good news in the landline business these days.
