Less than a week after CenturyLink CEO Jeff Storey said the company was considering strategic options for the company’s consumer business, including a possible sale, the company’s CFO and executive vice president Neel Dev offered a status quo report on the CenturyLink consumer business at a financial conference today.
Noting that the CenturyLink consumer business represents less than 25% of the company’s overall business, Dev said, “One thing we’ve thought about is ‘Is it better off being somewhere else?’”
He added, though, that “anything we do has to make sense relative to the cash flow that business generates” and must create value for shareholders. He said the company is “not interested in doing anything optically,” which his J.P. Morgan interviewer clarified to mean that the company is not interested in creating a tracking stock for the consumer business.
While exploring strategic opportunities for the consumer business, Dev said CenturyLink will continue working toward its goal of expanding margins in that business, and he described the opportunities that he sees there.
CenturyLink Consumer Business Opportunities
Dev touted CenturyLink’s Price for Life broadband offering, noting that nearly two-thirds (63%) of the company’s broadband customers are now on that pricing program. Launched in 2017, that program locks a customer into a specific price for a specific speed.
CenturyLink saw its average revenue per user increase as customers moved off limited-time promotional pricing to Price for Life. In addition, Dev said, “the customer experience benefit is huge.”
The company continues to upgrade homes in its local service area to fiber and according to Dev, decisions are made “not at the neighborhood level but at a household level.” Target households are in areas where the company can get high penetration and the cost to build is low, which tends to favor high-density neighborhoods with aerial fiber, Dev said.
Markets where fiber builds are currently underway include Boulder, Colorado; Denver and Seattle and “there is no dearth of opportunity,” Dev observed.
His interviewer prodded for more details, asking if half a million upgrades might be a reasonable number. Dev responded that half a million would be a “good” number, and “we could clearly do that.”
Video and CAF
As part of its efforts to boost margins, CenturyLink has de-emphasized its Prism video offering and according to Dev, now has less than 100,000 subscribers for that offering.
“We’re not selling it, but we’re not pushing people to disconnect,” he said. The company has contractual obligations to offer the product in certain markets, he noted.
Another opportunity for the CenturyLink consumer business comes via the FCC Connect America Fund program, which provides funding for the company to deploy broadband in rural areas where broadband is not already available. The company has seen higher than average take rates in those areas and has seen a “halo” effect in surrounding areas because the company has been able to upgrade broadband speeds in surrounding areas in connection with the CAF deployments, Dev said.
Even though the CenturyLink consumer business comprises less than a quarter of the company, it is nevertheless one of the largest local exchange carriers in the U.S.
Dev made his comments at the J.P. Morgan Global Technology, Media and Communications Conference, which was also webcast.