CenturyTel (CTL) shares are currently trading at $34.59, compared to the 52 week range of $20.45 and $35.16. Those who purchased the share in the last few months might be anxiously waiting to see the stock set a new 52 week high. Those who purchased the stock way back in 1999 or later in 2007 might be thinking will the stock breach the $40 mark at least. To these people, my article might offer a kind of solace. I am bullish that CenturyTel could breach $40 soon. Why is that so?
Quick look at the history
CenturyTel shares reached an all time high just short of $50 as recently as July 14, 2007. Way back in 1999, the share was trading at an average price of $42. During this period, the company had seen many ups and downs. In 2000, the company closed its call center and some operations; completed the sale of its wireless business to Alltel in 2002; purchased a 5,700-route mile fiber network from Digital Teleport in 2003; acquired Madison River Communications in 2007; and acquired EMBARQ (formerly a wholly-owned subsidiary of Sprint Nextel) in 2008.
For all the mistakes the company did during this period, investors were right in pounding the stock to below $40 levels. However, the company has learnt from its mistakes and now looks like a winner.
Why am I bullish on CenturyTel?
As of June 2009, CenturyTel Inc. operated 2 million telephone access lines, with about 85% penetration of households in its primarily rural and suburban markets. The company also generated revenues by providing long distance service to more than 60% of its customers, as well as by offering DSL broadband to 681,000 customers (35% penetrated), and dial-up Internet access to fewer than 100,000 customers. In addition, the company has partnered with EchoStar Communications to offer wholesale satellite services to 139,000 customers (12% penetration of primary residential lines) through CTL's product bundles. In 2008, 65% of revenues were from voice and network access services, with the remainder from data and fiber transport services.
In early July, CTL completed its planned acquisition of its larger, fellow telco Embarq Corp (EQ). CTL's strong financial position enabled it to structure this merger as a tax-free, stock-for-stock transaction and avoid credit market issues.
