CenturyLink's Solid Q2 Earnings Backed By Growing Business Services Revenue, Carrier 'Fully Expects' Data Center Sale
byGina Narcisi on August 3, 2016, 7:10 pm EDT
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Telecom giant CenturyLink reported solid second-quarter earnings Wednesday bolstered by thriving business services revenues that just beat Wall Street expectations. The provider also intimated that its data center assets will most likely be sold off in a transaction expected to be announced later this year.
While the long-awaited decision regarding whether the Monroe, La.-based carrier will sell or hold onto its data center assets didn't come down during the earnings call on Wednesday evening, CenturyLink’s president and CEO Glen Post said on the call that the probable sale will be announced by the end of this year's third quarter or the beginning of the fourth quarter.
“We remain optimistic about the level of interest and the prospect of a positive outcome … we fully expect right now there will be a sale, but we are not limiting ourselves to that,” Post said. “The co-location will continue to be an important part of our future,” the CEO said.
[Related: CenturyLink Acts As MSP For SD-WAN With New Bundled Offering]
“Our principle focus is on the sale of some or all of our data centers, but we also have alternatives should our process not result in a sale,” he added.
CenturyLink continued to see sales growth in its strategic business services in the second quarter ended June 30, a business unit that includes its high-bandwidth services such as MPLS and Ethernet offerings. Strategic business services grew 5.2 percent to $2.03 billion in the quarter, up from $1.92 billion in the second quarter of 2015. The provider's business high-bandwidth data services segment -- an offering that accounts for 29 percent of the provider's business revenue -- saw an 8 percent increase in the second quarter compared to one year earlier.
“We believe these trends validate the value and relevance of our service offerings, and we are working hard to expand and improve,” Post said.
C3DNA, an application life cycle management provider and CenturyLink partner, is seeing success selling many of CenturyLink's strategic business services, especially the carrier's multi-cloud connectivity and services, which are very appealing to customers with distributed IT environments, said Paul Camacho, co-founder of Santa Clara, Calif.-based C3DNA.
"CenturyLink is the fabric that connects different environments -- including cloud providers -- together," he said. " I also think their co-location and managed services assets give them a very unique touch for enterprise [customers]."
CenturyLink's focus on the channel is ultimately helping the vendor get its technology into the hands of more enterprise customers, Camacho said.
"As we continue to succeed as a company, a big part of that success will absolutely be dependent on the success of our partners," John DeLozier, CenturyLink's recently-appointed channel chief, told CRN in an interview following his appointment with CenturyLink in July.
DeLozier replaced CenturyLink's former Channel Alliance vice president Blake Wetzel, who left the carrier in May for a position at Rackspace as vice president of channels.
CenturyLink reported revenue of $4.40 billion for the second quarter. That narrowly beat the Wall Street consensus forecast of $4.39 billion in revenue, but it was down 0.5 percent from 2015's Q2 revenues of $4.42 billion.
CenturyLink reported net income of $196 million for the quarter and diluted earnings per share of 36 cents. That represented a whopping 37.1 percent increase in profits from $143 million in the same period last year, while earnings per share were up 38.5 percent from 26 cents one year ago.
The telecom service provider's legacy services, including voice services, declined 7.1 percent in the second quarter to $1.94 billion, down more than 7 percent from $2.09 in the year-ago period.
CenturyLink said it anticipates an increase in data integration service revenue and "continued growth in strategic revenues" in the current (third) quarter. But it expects those increases "to be offset by an anticipated decline in legacy revenues," resulting in lower third-quarter operating revenue - in the range of $4.35 billion to $4.40 billion - compared to the second quarter.
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