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Will CenturyLink's Expansion & Restructuring Efforts Pay Off?

On Jan 18, Zacks Investment Research upgraded leading local exchange carrierCenturyLink Inc.  CTL to a Zacks Rank #3 (Hold).

The company has been investing in fiber-to-the-tower (FTTT) expansion and to this end, expanded its fiber-based backhaul services to over 21,000 towers at the end of 2014. Further, CenturyLink expects its Managed Office and Managed Enterprise Solutions to continue gaining traction and drive revenue growth on the back of rising demand from small and large business customers.

CenturyLink has signed a new long-term interconnection deal with Cogent Communications Holdings, Inc. The bilateral pact for the service providers’ public IP networks will allow a stable and mutually cost-effective exchange of Internet traffic to cater to the rising use of the Internet. Moreover, the management aims to cover 40% of total targeted customers by the end of 2017 and achieve 100% coverage by 2020-end. At this juncture, we believe deployment of high-speed Internet services in the underserved rural areas, by making optimal use of government subsidy, may help the company strengthen its financial position going forward.

Recently, CenturyLink reported that it is considering the wholesale model to run its existing colocation data center facilities. Under this model, the company will lease its facilities to other businesses and service providers. Over the last three years, CenturyLink has been trying all means to establish itself as a global leader in cloud infrastructure and hosted IT solutions arena designed for enterprise customers.

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However, CenturyLink’s core local phone business has slowed down significantly. This is primarily due to the substitution of traditional wireline telephone services by wireless carriers like Verizon Communication Inc. VZ and AT&T Inc. T. In addition, the company also faces intense competition from cable TV operators like Frontier Communications Corp. FTR, which aggressively offer traditional voice, Internet TV and cloud services over their networks. Thus, the company is focused on bringing improved operating efficiencies through a number of methods including network simplification and rationalization.

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AT&T INC (T): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
CENTURYLINK INC (CTL): Free Stock Analysis Report
 
FRONTIER COMMUN (FTR): Free Stock Analysis Report
 
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Zacks Investment Research