For every dollar that it loses in legacy revenues, CenturyLink must generate two additional revenue dollars in growth areas in order to maintain its earnings level, said the company’s CFO Stewart Ewing yesterday. Considering that other incumbent local carriers are also grappling with how to replace declining high-margin voice service revenues, that revelation has potentially broad implications for telecom industry economics — particularly for companies that, like CenturyLink, lack a mobile business.
Ewing made his comments in a question-and-answer session at the Deutsche Bank Media, Internet and Telecom Conference, which was also webcast. Also at the session, Ewing revealed some additional information about the company’s video plans, which he said include a skinny bundle package.
That seems to be a key trend among telcos of late. Verizon was the first telco to offer a pared down video programming package at a reduced cost, but others – including Cincinnati Bell and now CenturyLink – have followed.
Ewing’s Telecom Industry Economics
CenturyLink is pursuing three key tactics in its efforts to stabilize earnings, Ewing said. One is to generate growth in strategic revenues. Another is to lessen the decline of legacy revenues. And the third is cost control. Ewing noted, for example, that the company wants to consolidate back office systems and move to more of a self-service model as a means of reducing customer care costs.
The company in recent years has pointed to business services and broadband as its strategic growth areas. As for the company’s strategy to grow those businesses, Ewing noted that the company expects to gain higher take rates in areas where it already has invested in broadband and to continue to make investments to boost broadband data rates.
On the business market side, Ewing said the company aims to “deliver more asset-light services such as IT services, cloud services and managed hosting.” He also noted that the company wants to reduce provisioning times to enhance the customer experience and generate revenues more quickly.
Additionally, the company wants to improve the customer experience by reducing the number of products sold so that salespeople can be more efficient and effective. And it wants to reduce churn rates on both the consumer and business side.
Like some other carriers, CenturyLink is looking at selling its data centers. But if the company were to make such a move, it would retain its hosting business, Ewing said. The reason is that having that business makes it “easier to talk to the CIO,” Ewing said. The carrier apparently views having the ear of business customers’ CIO as an important factor in maximizing sales in the business market.
Ewing said it will take a few years for CenturyLink to reach its revenue stabilization goal.
Skinny Bundle Plans
Ewing didn’t offer many details about CenturyLink’s skinny bundle plans. But he noted that the company is negotiating content rights to offer slimmer programming packages. In negotiating those deals, he said the company aims to ensure that the deals “allow us to offer multiple OTT tiers,” he said. Just last week, another CenturyLink executive noted the company’s plans for an OTT video offering similar to what AT&T recently launched, and according to Ewing, the skinny bundle is part of those plans.
Ewing added that the company might offer skinny bundles outside its traditional local service footprint. That’s a strategy that would be dependent on an OTT delivery model.