CenturyLink is scaling back expectations for the full year 2017 as revenues continue to drop and broadband subscriber figures flounder amid intense competition.
The operator reported second quarter revenue of $4.09 billion, down from $4.4 billion the year prior. Within that figure, legacy service revenue fell the most, dropping 10.2 percent year over year to $1.74 billion. Strategic services revenue was also down 5.7 percent to $1.92 billion. By segment, both consumer and enterprise revenues also declined, falling 6.2 percent to $1.40 billion and 9 percent to $22.2 billion, respectively.
CenturyLink lost 77,000 broadband subscribers between the first and second quarters, and that figure was also down 122,000 from the same quarter a year ago. Access line subscribers were also down 212,000 from the previous quarter. Both of those figures fell short of Wells Fargo’s respective estimates of 5,000 broadband losses and 160,000 access line losses.
According to comments from CenturyLink’s President of Consumer Markets Maxine Moreau on Wednesday’s earnings call, the broadband losses mainly come from a drop off in lower-tier customers.
“When you’re looking at our net adds, what you’re not seeing in that number is the speed mix,” Moreau says. “So where we’re losing customers is really on the low end like under 20 meg. But when you get to 20, 40, and above, we’re seeing growth year over year in subscribers. And what we say is as the customers move in higher-speed tiers, we see a corresponding reduction in churn.”
On the video side of the house, Wells Fargo Senior Analyst Jennifer Fritzsche notes CenturyLink “pivoted mid-quarter in strategy regarding its PrismTV (OTT video) product, and is open to any video add-on that might increase consumer ARPU and improve churn trends.”
Moreau declined to break out Prism subscriber figures for the quarter, but CenturyLink CEO Glen Post indicates the company has lost around 21,000 Prism customers so far this year as it has deemphasized that offering.
As a result of revenue and subscriber pressures, Jeffries Analyst Mike McCormack observes CenturyLink has tempered its previously “lofty” expectations of an implied $70 million acceleration in high bandwidth and managed services in the second half of the year. The company has now lowered its outlook to below its previous guide.
CenturyLink is forecasting third quarter revenues of $4.06 billion to $4.14 billion with adjusted earnings per share of 44 cents to 50 cents. For the full year, CenturyLink Controller David Cole says the company expects to come in “slightly below” its revenue and adjusted diluted EPS guidance thanks to “higher legacy revenue decline and lower consumer broadband revenue growth than anticipated.”
Still, Post indicates the company is on track to be in a better position for the future.
“Enterprise demand for high-bandwidth data services remains strong and, while consumer broadband units were weaker than expected, we are encouraged by the higher-value customers our improved offerings are attracting,” he comments in a statement. “We accelerated our capital investment in high-bandwidth services and broadband infrastructure during the second quarter, which we believe better positions us to increase revenues in the second half of 2017 and beyond.”