CenturyTel, Inc. -  Communications Services - Category Directory

100 CenturyTel Drive

Monroe, Louisiana 71203
(318) 388-9000
www.centurytel.com

Sales

$311 million

Business Description 

CenturyTel, Inc. ("CenturyTel") is a regional integrated
communications company engaged primarily in providing local exchange telephone
services. For the year ended December 31, 2003, local exchange telephone
operations provided 87% of the consolidated revenues from continuing operations
of CenturyTel and its subsidiaries (the "Company"). All of the Company's
operations are conducted within the continental United States.

      At December 31, 2003, the Company's local exchange telephone subsidiaries
operated approximately 2.4 million telephone access lines, primarily in rural,
suburban and small urban areas in 22 states, with over 70% of these lines
located in Wisconsin, Missouri, Alabama, Arkansas and Washington. According to
published sources, the Company is the eighth largest local exchange telephone
company in the United States based on the number of access lines served. For
more information, see "Telephone Operations."

      The Company also provides long distance, Internet access, fiber transport,
competitive local exchange carrier, security monitoring, and other
communications and business information services in certain local and regional
markets.

TELEPHONE OPERATIONS

According to published sources, the Company is the eighth largest local
exchange telephone company in the United States, based on the approximately 2.4
million access lines it served at December 31, 2003. All of the Company's access
lines are digitally switched. Through its operating telephone subsidiaries, the
Company provides services to predominantly rural, suburban and small urban
markets in 22 states.

Services

The Company's local exchange telephone subsidiaries derive revenue from
providing (i) local telephone services, (ii) network access services and (iii)
other related services. 

Local service. Local service revenues are derived from providing local
exchange telephone services in the Company's service areas, including basic
dial-tone service through the Company's regular switched network and local
private line services. Access lines declined 1.6% in 2003, 1.1% in 2002
(exclusive of the 2002 Verizon acquisitions) and 0.2% in 2001. The Company
believes these declines in the number of access lines were primarily due to
general economic conditions in the Company's markets and the displacement of
traditional wireline telephone services by other competitive service providers,
including the Company's DSL product offering. Even as the economy recovers, the
Company believes that any rebound in access lines will be limited by continued
access line losses caused primarily by the impact of other competitive services.
Based on current conditions, the Company expects access lines to decline between
1 and 2% for 2004.

The use of digital switches, high-speed data circuits and related software
has been an important component of the Company's growth strategy because it
allows the Company to offer enhanced voice services (such as call forwarding,
conference calling, caller identification, selective call ringing and call
waiting) and data services (such as data private line, digital subscriber line,
frame relay and local area/wide area networks) and to thereby increase
utilization of existing access lines. In 2003 the Company continued to expand
the availability of enhanced services offered in certain service areas.

Network access. Network access revenues primarily relate to (i) services
provided by the Company to long distance carriers, wireless carriers and other
carriers and customers in connection with the use of the Company's facilities to
originate and terminate their interstate and intrastate voice and data
transmissions and (ii) the receipt of universal support funds which allows the
Company to recover a portion of its costs under federal and state cost recovery
mechanisms (see - "Regulation and Competition - High-cost support funds" below).
Certain of the Company's interstate network access revenues are based on
tariffed access charges prescribed by the Federal Communications Commission
("FCC"); the remainder of such revenues are derived under revenue sharing
arrangements with other local exchange carriers ("LECs") administered by the
National Exchange Carrier Association ("NECA"), a quasi-governmental non-profit
organization formed by the FCC in 1983 for such purposes.

Certain of the Company's intrastate network access revenues are derived
through access charges billed by the Company to intrastate long distance
carriers and other LEC customers. Such intrastate network access charges are
based on tariffed access charges, which are subject to state regulatory
commission approval. Additionally, certain of the Company's intrastate network
access revenues, along with intrastate and intra-LATA (Local Access and
Transport Areas) long distance revenues, are derived through revenue sharing
arrangements with other LECs.

AT&T filed a petition with the FCC in December 2003 seeking forbearance
from enforcing certain provisions of the Telecommunications Act of 1996 that
allows LECs to file access tariffs on a streamlined basis and, if certain
criteria are met, deems those tariffs lawful. Certain of the Company's
telephone subsidiaries file interstate tariffs directly with the FCC using this
streamlined filing approach. As a result of recent court rulings, tariffs that
have been "deemed lawful" in effect nullify an interexchange carrier's ability
to seek refunds should the earnings from the tariffs ultimately result in
earnings above the authorized rate of return prescribed by the FCC. The Company
has not recognized any revenues in excess of the authorized rate of return
applicable to those carriers who historically have requested refunds pending
resolution of the "deemed lawful" tariff issue. The Company will continue to
monitor the status of the AT&T petition with the FCC. Although it is possible
the Company could benefit favorably upon resolution of this issue, there is no
assurance that a favorable outcome will occur.

Other. Other telephone revenues include revenues related to (i) leasing,
selling, installing, maintaining and repairing customer premise
telecommunications equipment and wiring, (ii) providing billing and collection
services for long distance companies and (iii) participating in the publication
of local directories.

Certain large communications companies for which the Company currently
provides billing and collection services continue to indicate their desire to
reduce their billing and collection expenses, which has resulted and may
continue to result in reductions of the Company's billing and collection
revenues. In addition, the Company expects its 2004 directory revenues to
decline from 2003 levels due to reduced revenues associated with the Verizon
properties acquired in 2002.

 

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