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CenturyLink Inks Defense Deal


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One of the leading integrated telecommunications service providers, CenturyLink Inc. (CTL - Analyst Report) inked a 10-year deal worth $750 million with the U.S. defense department for providing high-speed Internet service to Defense Research and Engineering Network (DREN) III.

CenturyLink will connect the supercomputers of each department with its advanced fiber-optic network, thereby delivering speeds of 50 Mbps to 100 Gbps. Moreover, the company will connect the scientists and engineers of popular research institutions with the U.S. defense group by delivering Ethernet, Internet Protocol and optical wave services through a Virtual Private Local Area Network Service.

CenturyLink is also taking initiatives to curtail access line losses, though it exerts pressure on voice and network access revenues. The company is bundling integrated services, promoting new services such as video, obtaining new wireless spectrum from Federal Communications Commission (FCC) and improving infrastructures through network investment. This should work in favor of the company’s revenues and earnings.

Further, the company continues to strengthen its competitive position through partnerships and product launches. CenturyLink has started reselling Verzion Communications Inc.’s (VZ - Analyst Report) products and services to small business customers and aims to expand its services in all markets over the next several months in a phased manner.

However, stiff competition from other low-cost telecom operators like LEAP Wireless International Inc. and Clearwire Corp. significant integration challenges coupled with increased operating expenses resulting from the acquisitions may impede the company’s operating performance, going forward.

CenturyLink currently carries a Zacks Rank #3 (Hold).

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