CenturyLink (CTL) is one of the three largest local telephone companies in the United States. Ongoing growth can be as strong and rapid at we see at AT&T (T) and Verizon Communications Inc. (VZ) . However, for CenturyLink, that has not been the case...at least so far. Let’s take a closer look at the company, and to use a little Super Bowl lingo, issue a two-minute warning.
Rapid Growth Needed to Keep Shareholders Happy
To begin with, I like CenturyLink. I think they have as much rapid growth potential as other successful companies like AT&T and Verizon. However, their slow growth puts them in a weaker position in the marketplace.
What I mean is, if advanced services are not offered quickly enough, CenturyLink customers can and will switch to a competitor. If they do that, investors will not be happy.
That said, I think CenturyLink can grow if they focus on new and advanced services for growth, and not just on acquiring other companies.That’s the mistake that Windstream has made over time. Windstream is also a good company, with good people and a good network, but they have grown through acquisitions more than new services.
Going forward, customers are demanding new and advanced services. So if a company is only focused on acquiring other companies, and not creating advanced services, they will start to lose business.
That’s the challenge CenturyLink faces today. I think 2015 is the year that CenturyLink has to have their coming out party. They have spent years growing through acquisitions. They have acquired many competitors like Embarq, Qwest, Savvis and many others. This gives them a much larger customer base to work with, allowing them a much more advanced level of potential service offerings to grow on.
CenturyLink has been too quiet. This has become a very noisy industry. Quiet companies disappear into the woodwork. To be successful, you need to lead the conversation, or at least be part of the conversation. CenturyLink has not, and that must change.
So where is CenturyLink growth coming from today? I would say their growth is still coming more from acquisitions, and less from new services. That’s the part that must change.
Emulating AT&T and Verizon's Success
Look at the two largest companies in the CenturyLink space: AT&T and Verizon. Ten years ago, both AT&T and Verizon were mostly local phone companies dabbling in other sectors.
Today, local phone service is shrinking, and AT&T and Verizon growth is coming from other advanced services like wireless, Internet, television like Uverse and FiOS over IPTV, the cloud, and other areas as well.
AT&T and Verizon are not sitting still. They are continuing to grow into new areas.
- Their IPTV like Uverse and FiOS is taking business from the traditional cable television competitors like Comcast Corporation (CMCSA) and Time Warner Cable Inc. (TWC) .
- Their wireless business is continuing to grow and expand, and is now helping other industries like automotive and healthcare to grow and change, with huge growth opportunities possible.
- The 1 Gig ultra high speed Internet business is growing, and companies like AT&T Gigapower and Google Fiber from Google Inc. (GOOG) lead the way.
- All this and more show why larger competitors like AT&T, Verizon and Google are rapidly growing and changing the expectations of customers.
- CenturyLink has the same potential for growth. However, they have not been as aggressive or expanded as quickly. Why? They have focused on acquisition rather than internal growth.
That must change, if for no other reason than they will start to lose customers to competitors if they don’t.
A company can do what they want. Only themself, their workers and their investors and will pay the price if they make a mistake.
The Need for Continuing Innovation
However, customers are an element that will play a larger role going forward. Innovation and speed and new services are what customers are looking for. And if CenturyLink does not innovate, customers may leave for a competitor who does.
So like it or not CenturyLink, you must be in the rapid innovation space going forward or you will lose. You must also be willing to be center stage and talk about all the change the industry and you and your customers are going through. You must be high profile to win.
That said, I hope to see this company jump in with both feet and really start to compete with advanced new services. I want them to continue to be successful, and a real competitor. However, I have been an industry analyst for more than 25 years. I have worked with, and followed many companies in this space, and surprisingly, I have not heard much from CenturyLink over that time. For me, that raises a red flag - a warning sign. I am concerned for their future growth potential.
Some continue to grow and do strong business. Some continue to create the next wave to grow on.
However, others seem to let the single wave they are riding rise, crest and fall - taking them with it. We have seen this over time with companies like Motorola Solutions Inc. (MSI) , Nokia Corporation ($ADR), Blackberry Ltd. (BBRY) and others.
I would not like to see the wave pass CenturyLink by in the same way, leaving them adrift in a shrinking marketplace. Now is the time for CenturyLink to come out of its shell. To focus on all these advanced services, to take center stage and attract the attention of the media, analyst and investor community in a positive way.
It’s not too late if they act now. Let’s hope they do. This is their two-minute warning.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer