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CenturyLink Wins Multi-Year UCaas Contract from US Senate
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Recently, CenturyLink Inc. , a leading regional telecom service provider, won a three-year contract to provide the U.S. Senate state offices with a unified communications-as-a-service (UCaas) platform for hosted voice-over-internet-protocol (VoIP) service. Total contract is worth $11.4 million, which will be distributed as $3.8 million per year.
Though the contract size is not a big one, it justifies CenturyLink’s ability to migrate a large number of public sector customers to a cloud-based network infrastructure. The U.S. has more than 450 senate offices across 50 states. CenturyLink will install, maintain, operate and manage cloud-based services in these locations.
Earlier this year, the company secured extensions in two existing public sector contracts namely the Networx Universal contract which has been extended through the end of Mar 2020, while the Networx Enterprise contract has been extended through the end of May 2020.
Notably, in Oct 31, 2016, CenturyLink entered into a definitive agreement to acquire Level 3 Communications Inc. for a total consideration of approximately $34 billion including debt. The equity value of this deal is approximately $25 billion. The deal is anticipated to be closed in the third quarter of 2017, subject to customary regulatory approvals.
Both CenturyLink and Level 3 Communications provide communications services like data, voice and video transmission for large enterprises. Notably, Level 3 Communications is the provider of one of the largest Internet backbone in the world. However, in recent years, both the companies have been struggling to maintain their business momentum after facing severe competitive threats from large telecom operators such as Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and Comcast Corp. (CMCSA - Free Report) .
If the proposed merger finally materializes, it will increase CenturyLink's network by 200,000 route miles of fiber including 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents. CenturyLink's on-net buildings are expected to increase by nearly 75 percent to approximately 75,000, including 10,000 buildings in EMEA (Europe, the Middle East and Africa) and Latin America. Consequently, a merged CenturyLink and Level 3 Communications are likely to become a formidable challenger to their large counterparts.
Price Performance of CenturyLink
Year to date, the stock price of CenturyLink has witnessed a negative growth of 3.86%, underperforming the Zacks categorized U.S National Wireless industry’s growth rate of 21.55% in the same time period. CenturyLink is currently going through a difficult phase. Management provided a dismal outlook for 2016 which can be largely attributed to continued pressure on wholesale revenues along with high employee and benefit costs due to severe competitive pressure from its larger peers.
However, the proposed acquisition of Level 3 Communications and deployment of high-speed Internet services in the underserved rural areas may help the company to regain its lost glory. We believe these are primary reasons behind the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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CenturyLink Wins Multi-Year UCaas Contract from US Senate
Recently, CenturyLink Inc. , a leading regional telecom service provider, won a three-year contract to provide the U.S. Senate state offices with a unified communications-as-a-service (UCaas) platform for hosted voice-over-internet-protocol (VoIP) service. Total contract is worth $11.4 million, which will be distributed as $3.8 million per year.
Though the contract size is not a big one, it justifies CenturyLink’s ability to migrate a large number of public sector customers to a cloud-based network infrastructure. The U.S. has more than 450 senate offices across 50 states. CenturyLink will install, maintain, operate and manage cloud-based services in these locations.
Earlier this year, the company secured extensions in two existing public sector contracts namely the Networx Universal contract which has been extended through the end of Mar 2020, while the Networx Enterprise contract has been extended through the end of May 2020.
Notably, in Oct 31, 2016, CenturyLink entered into a definitive agreement to acquire Level 3 Communications Inc. for a total consideration of approximately $34 billion including debt. The equity value of this deal is approximately $25 billion. The deal is anticipated to be closed in the third quarter of 2017, subject to customary regulatory approvals.
Both CenturyLink and Level 3 Communications provide communications services like data, voice and video transmission for large enterprises. Notably, Level 3 Communications is the provider of one of the largest Internet backbone in the world. However, in recent years, both the companies have been struggling to maintain their business momentum after facing severe competitive threats from large telecom operators such as Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and Comcast Corp. (CMCSA - Free Report) .
If the proposed merger finally materializes, it will increase CenturyLink's network by 200,000 route miles of fiber including 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents. CenturyLink's on-net buildings are expected to increase by nearly 75 percent to approximately 75,000, including 10,000 buildings in EMEA (Europe, the Middle East and Africa) and Latin America. Consequently, a merged CenturyLink and Level 3 Communications are likely to become a formidable challenger to their large counterparts.
Price Performance of CenturyLink
Year to date, the stock price of CenturyLink has witnessed a negative growth of 3.86%, underperforming the Zacks categorized U.S National Wireless industry’s growth rate of 21.55% in the same time period. CenturyLink is currently going through a difficult phase. Management provided a dismal outlook for 2016 which can be largely attributed to continued pressure on wholesale revenues along with high employee and benefit costs due to severe competitive pressure from its larger peers.
However, the proposed acquisition of Level 3 Communications and deployment of high-speed Internet services in the underserved rural areas may help the company to regain its lost glory. We believe these are primary reasons behind the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>