CenturyLink 2008 Annual Report Download - page 4

An Opportunity to Accelerate, Diversify and Expand
Size and scale increasingly provide a platform for success in the
communications industry, especially among providers serving
less populated areas. Rapidly changing technologies, shifting
customer demands and regulatory hurdles create an industry
environment that favors companies with greater nancial
resources, high-quality network assets and diversied revenue
streams. We believe our proposed merger with EMBARQ will
yield signicant advantages for the combined company along
each of these dimensions.
The combination of CenturyTel and EMBARQ will create a
leading communications provider with approximately 7.7 million
access lines, more than two million broadband customers and an
operating presence in 33 states. As a combined company, we will
leverage our strategic assets, diversify revenues across rural and
urban markets, and expand our ability to quickly and eciently
deliver a broader range of advanced services to a larger customer
base. In addition, we expect to generate signicant annual
operating eciencies of approximately $400 million within
the rst three years.
Our strong nancial position enabled us to structure this merger
as a tax-free, stock-for-stock transaction and avoid credit market
issues. The all-equity transaction is expected to be accretive to
cash ow in the rst full year post-closing, enable an approximate
50 percent dividend payout ratio, and provide the combined
company with a strong capital structure.
Shareholders of both companies overwhelmingly approved the
merger on January 27, 2009, and we are on track to complete it in
the second quarter. Regulatory and legal teams from CenturyTel
and EMBARQ continue to work to secure the required state and
federal approvals, and integration planning is ongoing. We have
received nal approval of the merger in eight of the 15 states
where formal approval is required.
Looking ahead, we believe there are clear and well-dened oppor-
tunities to create value as a combined company. For example, we
will be able to serve urban markets such as Las Vegas and the
greater Orlando area with a dierentiated approach that lever-
ages our strong and expanding ber transport network, and, in
the future, we expect to introduce broadband technologies such
as digital video. We believe the combined company’s expanded
network will multiply our growth opportunities and strengthen
our competitive position.
Building our Broadband Business
Throughout 2008, CenturyTel’s talented and professional
employees maintained a clear focus on providing high-quality,
advanced communications services – particularly broadband –
to our customers as we strive to be the broadband leader in our
markets. During 2008, revenues from high-speed Internet ser-
vices grew 26.5 percent over 2007. We added more than 85,000
high-speed Internet customers in 2008, a 15.5 percent increase
over the prior year.
We oer a wide range of Internet services, from lower speeds
for value-conscious consumers to speeds as high as 15 Mbps for
speed-conscious consumers. As a result, CenturyTel has one of
the highest broadband penetration rates among its peers. In fact,
our incremental penetration rate has grown faster than our indus-
try peers in six of the last eight quarters.
We continue to expand ber deployment, provide broadband
capabilities deeper into our network, and enhance our customers’
experience with increased bandwidth. At year-end 2008, more
than 88 percent of our access lines were broadband-enabled,
up from less than 84 percent at year-end 2007. In addition, 57
percent of our broadband-enabled lines were capable of speeds
up to 10 Mbps. This is particularly noteworthy given the low
population densities of the markets we serve – only 12 households
per square mile on average.
PAGE 2
To Our Shareholders continued...
“The combination of CenturyTel and EMBARQ will
create a leading communications provider with
approximately 7.7 million access lines, more than
two million broadband customers and an operating
presence in 33 states.”