CenturyLink, Frontier, and Windstream's Q3 results will highlight cost cutting, broadband, says Jefferies

When CenturyLink, Frontier and Windstream announce their third-quarter earnings in the next few weeks, analysts expect that these providers will focus comments around efforts to reduce costs and grow broadband share.

Jefferies said in a research note that it has adjusted its estimates for the three telcos for the third quarter, but for reasons specific to each company.

“While management teams have largely downplayed storm impacts (mostly network capex), we would not be surprised to hear of an impact to gross adds, which could extend into 4Q,” Jefferies said in a research note. “Nevertheless, we modestly improved broadband sub declines in 3Q given corporate initiatives.”

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CenturyLink, which is expecting to close its Level 3 acquisition after getting final FCC approval this month, is expected to report revenues 0.5% below consensus due to lower legacy and data integration revenue.

Jefferies said that the reduction illustrates lower expectation for high speed data services and IT & Managed Services “where we continue to believe the 2H ramp may be slower given delayed decision-making ahead of the Level 3 deal close.”

On the broadband front, CenturyLink’s effort to simplify broadband pricing with the Price for Life offer could temper broadband losses.

With the Price for Life program, the broadband price is locked in and does not change unless a subscriber changes their services, including change of address, and/or signs up for a different promotion.

"We also moderate our broadband losses by 5k, to -45k, reflecting improved churn performance from the Price for Life offer, though implementation of the new pricing strategy continued throughout the quarter," Jefferies said. 

Following a challenging second-quarter Jefferies has forecast Frontier will report $2.24 billion in revenues.

A key focus investors will consider in evaluating Frontier’s third-quarter results will be how the telco’s CTF markets performed.

The analyst firm expects an uptick in residential broadband and business revenues.

“Within CTF markets, we anticipate an improvement in residential revenue while commercial should remain fairly stable,” Jefferies said. “We expect a continued focus on broadband subscriber trends, with our estimate of a total 78k loss modestly worse than the Street's -68k as we believe storms may have impacted gross adds in the quarter, though this may be difficult to quantify.”

Jefferies added that it expects lower “CTF FiOS churn to contribute to improved rates of subscriber declines while legacy broadband losses should also improve from a disappointing 2Q.”

Finally, at Windstream, Jefferies maintained its third-quarter estimates, but adjusted OIBDAR forecast by 2%, to $503.

In the consumer segment, Jefferies expects broadband losses of 11,000, down from the initial 18,000 estimates.

The firm said that the lower churn numbers reflect “more competitive pricing relative to Cable in response to a challenging 2Q.”

One of the key elements Windstream will need to show is how it is marketing higher speeds after completing its Project Excel last mile upgrade program.

On the business services front, Windstream has set a tone to capitalize on growth for UCaaS and SD-WAN services it bolstered through its acquisitions of EarthLink and Broadview , but Jefferies says these developments are “unlikely to move the needle meaningfully in the near term.”