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Will CenturyLink’s Core Revenue Decrease in 2Q16?

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CenturyLink’s core revenue

In the previous part of this series, we learned that Wall Street expects CenturyLink’s (CTL) revenue to decline marginally by ~0.6% YoY (year-over-year) to reach ~$4.4 billion in 2Q16.

When it released its 1Q16 results, CenturyLink gave guidance for its core revenue (comprising legacy and strategic revenue) to range from ~$3.9 billion–$4.0 billion for 2Q16. In 2Q15, the revenue stream of this wireline telecom had generated ~$4 billion.

The declining trend in CenturyLink’s core revenue continued during 1Q16. As we can see in the above bar chart, this revenue stream fell by ~1.9% YoY to reach ~$4.0 billion for the quarter.

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The telecom company’s Strategic Services segment grew during 1Q16. Meanwhile, CenturyLink’s legacy revenue continued to decline. Its Strategic Services revenue rose by ~1.5% YoY to reach ~$2.4 billion in 1Q16. Meanwhile, the company’s Legacy revenue fell by ~6.4% YoY to ~$1.6 billion during the quarter.

1Q16 performance of CenturyLink’s Strategic Services segment

During 1Q16, CTL’s Business segment’s high-bandwidth data services, as well as its Consumer segment’s high-speed Internet components, drove the revenue growth of CenturyLink’s Strategic Services segment. The revenue from its Business high-bandwidth data services business grew by ~7.4% YoY to reach ~$0.74 billion in 1Q16.

Meanwhile, CenturyLink’s Consumer high-speed Internet component generated ~$0.67 billion of revenue, a YoY growth of ~5% for the quarter.

For diversified exposure to telecom players in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). At the end of May 2016, SPY held ~2.7% in AT&T (T), Verizon (VZ), CenturyLink, Level 3 Communications (LVLT), and Frontier Communications (FTR).

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