Lumen Technologies Inc (LUMN) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the CenturyTel fourth quarter earnings conference call.

At this time, all participants are on a listen only mode.

Later, we will conduct a question and answer session, and instructions will be given at that time.

(OPERATOR INSTRUCTIONS).

As a reminder, this call is being recorded.

I'd now like to introduce your host for today's conference, Mr.

Tony Davis, Vice President of Investor Relations with CenturyTel.

Mr.

Davis, you may begin your conference.

Thank you, Darlene.

Good morning everyone and welcome to our call today to discuss CenturyTel's fourth quarter 2007 earning results released earlier this morning.

During today's call we will refer to certain non-GAAP financial measures and we have reconciled these measures to GAAP figures in our earnings release which is available on our website at www.Centurytel.Com.

Your host for today's call is Glen Post, Chairman and Chief Executive Officer of CenturyTel.

Joining Glen on the call today is Stewart Ewing, CenturyTel 's Executive Vice President and Chief Financial Officer.

Also available during the call today is Karen Puckett, CenturyTel's President and Chief Operating Officer.

We will be making certain forward-looking statements today, particularly as they pertain to guidance for first quarter and full year 2008, selected information regarding 2007, and 2008, and other outlooks in our business.

Please review our Safe Harbor language found in our press release and in our SEC filings which describe factors that the could cause our actual results to differ materially from those projected by us in our forward-looking statements.

Our call today will be accessible for telephone replay through February 20, 2008 and accessible for webcast replay through March 5, 2008.

For anyone listening to a taped or webcast replay of this call, or for anyone reviewing a written transcript of today's call please note all information presented is current only as of February 14, 2008 and should be considered valid only as of this date, regardless of the date listened to or reviewed.

With that, at this time I'll turn the call over to your host today, Glen Post.

Glen?

Thank you, Tony.

We appreciate you joining us today as we discuss CenturyTel 's fourth quarter 2007 operating results and our guidance for the first quarter and full year 2008.

Diluted earnings per share excluding non-recurring items was $0.82 for the quarter or $0.11 ahead of the upper end of our previous guidance and First Call consensus of $0.71.

These increased earnings were driven by higher than anticipated interstate access revenues and the impact of continued reductions in our cost structure, along with the impact of a reduced annual income tax rate and higher income from our investment in a wireless partnership.

Operating revenues excluding non-recurring items for the quarter were $657.8 million, which exceeded the upper end of our previous revenue guidance of $645 million to $655 million.

This revenue performance above our guidance primarily resulted from higher than anticipated interstate access revenues and other wireline revenues during the quarter.

We also have continued to see strong demand for broadband services during the fourth quarter as we achieved 32% growth in data revenues over fourth quarter 2006, excluding the Madison River acquisition, acquired properties, that growth was 18%, 18% of data revenue growth.

This increase was primarily driven by the addition of nearly 129,000 high speed internet subscribers or nearly 35% over the last 12 months, excluding the Madison River properties.

Growth in data revenues and the revenue contribution of the Madison River properties during the quarter more than offset anticipated revenue reductions, attributable to access line declines and lower access revenues and lower revenues associated with changes to the terms of our DBS agreement, effective January 1, 2007, and a one-time negative adjustment to our fiber transport revenues during the quarter.

We also generated solid free cash flow of nearly $86 million during the quarter while investing over $40 million in capital improvements, that in the fourth quarter of 2006.

For full year 2007 we generated a record $564 million of free cash flow.

Our total capital expenditures for 2007 were $326 million, and for the fourth quarter were $141 million.

These investments were primarily focused on increasing our broadband capabilities, our switch digital video operations, expansion of our core fiber network, and on the newly acquired Madison River properties.

We added nearly 26,000 high speed internet customers during the fourth quarter, which represents approximately 4.9% sequential growth in broadband customers.

We ended 2007 with more than 555,000 high speed internet customers or 31% penetration of DSL-enabled lines and 26% of total access lines.

We experienced access line losses of approximately 35,700 during the quarter which equates to a normalized loss of 5.7%.

From a overall bundle standpoint, 34.5% of residential customers and Legacy CenturyTel properties associated with one of our bundle offerings compared to 28.5% a year ago.

We also continued to improve sales performance on our digital satellite product that began in the third quarter, driven by our focus on the triple play bundle positioning and promotion strategy, as of December 31, 2007, we served more than 54,000 satellite TV subscribers, which includes over 8,000 added during the fourth quarter.

We're expecting our penetration of this service to grow in the months ahead.

Before turning the call over to Stewart, I want to briefly comment on a couple of other items.

First as you know, we completed the acquisition of Madison River on April 30th.

The integration of the properties in the CenturyTel's operations is well under way with provisioning and building conversion now completed for three of the four properties.

At year-end 2007, we had achieved a run rate of nearly $10 million in annualized synergies from these properties.

We still expect to complete the conversion of the final property in the second quarter 2008 and we believe we're on target to achieve approximately $17 million in annual net synergies along with additional incremental cost savings over time.

We remain very focused on customer acquisition and retention.

We're expanding our consumer distribution capabilities and we have moved to neighborhood queues in our call centers.

We've had great feedback from our employees and more importantly, from our customers on their positive experience from these initiatives.

We continue to position ourselves as the broadband provider of choice and our marketplace, our bundle offerings and high speeds up to 10 megabits, continue to drive strong demand for our broadband products.

We also continue to return significant cash to shareholders during the fourth quarter as we repurchased more than 2.8 million shares of common stock for approximately $122 million in our $750 million repurchase program, authorized by the Board in August of 2007.

We ended 2007 with a strongest balance sheet in our industry sector and we have had the financial flexibility to take advantage of growth opportunities as they arise, and with that I'll turn the call over to Stewart to provide additional detail on our results for the fourth quarter and update to you our financial guidance for 2008.

Stewart?

Thank you, Glen.

During the next few minutes I'll cover some highlights from our fourth quarter 2007 operating results and briefly discuss CenturyTel's capital structure and liquidity.

I'll conclude my comments this morning with a discussion of first quarter and full year 2008 guidance provided in our earnings release issued earlier today.

As a reminder, all comments regarding actual results for fourth quarter 2007 and 2006 exclude those non-recurring items detailed on the financial statements accompanying the press release.

For fourth quarter 2007, operating revenues increased 8.3% to $657.8 million from $607.7 million in fourth quarter 2006.

This increase was primarily due to the $49 million revenues contributed by the Madison River properties.

Excluding the revenue contribution by the Madison River properties, operating revenues increased modestly or about $1.2 million year-over-year.

Our voice revenues for fourth quarter 2007 were $225.5 million versus $214.2 million in fourth quarter a year ago.

This 5.3% increase in voice revenues was primarily driven by voice revenues from the Madison River properties and growth in long distance voice revenues, which more than offset revenue declines associated with lower access lines.

Network access revenues were $216.6 million versus $211.8 million in fourth quarter 2006.

This increase of nearly $5 million was driven by network access revenues contributed by the Madison River properties, which more than offset revenue declines associated with lower intrastate minutes of use and lower interstate revenue requirements as a result of lower operating expenses and a decline in our net planned investment.

Data revenues increased 32.3% from $92.3 million in fourth quarter 2006 to $122.1 million in fourth quarter of 2007.

Primarily driven by the strong high speed internet customer growth during the last 12 months and the data revenues contributed by the Madison River properties that more than offset revenue declines associated with lower dial-up internet revenues.

Fiber transport and CLEC revenues decreased 3.3% to $38.5 million in fourth quarter 2007 from $39.8 million in fourth quarter 2006 due to CLEC customer disconnects along with fiber customer billing settlements and related adjustments, which more than offset wholesale revenue growth in our fiber transport business and revenues from the acquired properties.

Other revenues were $55.1 million, compared to $49.6 million in fourth quarter 2006.

This 11.2% increase was primarily driven by the revenues contributed by the Madison River properties.

Operating expenses increased 9.2% from $434 million in fourth quarter 2006 to $473.9 million in fourth quarter 2007.

This increase in operating expenses was primarily driven by the acquisition of the Madison River properties and growth in high speed internet customers, which were partially offset by lower personnel related costs.

For fourth quarter 2007, we generated an operating cash flow margin of 48.9%, compared to the 49.4% in fourth quarter 2006.

Operating income for fourth quarter 2007 was $183.9 million, a 5.9% improvement over fourth quarter 2006 operating income of approximately $173.7 million.

This increase was primarily driven due to the incremental operating income contribution from the Madison River properties.

Other income was favorably impacted by approximately $5.9 million during the quarter due to higher income from our equity interest in a wireless partnership.

Additionally, income tax expense decreased as a result of adjusting to our annual effective tax rate of 37.7%.

Net income for the quarter rose nearly 13.1% to $89.8 million compared to $79.4 million in fourth quarter 2006.

There were also several non-recurring items that occurred during fourth quarter.

First, we received an after-tax insurance reimbursement of $1.9 million related to hurricane related claims.

Second, we received after-tax proceeds of $2.4 million related to the liquidation of rural telephone bank stock and third, we recognized a $32.7 million tax benefit related to the adjustment of income tax reserves due to resolution of previously uncertain tax positions in accordance with FIN 48.

These items were partially offset by after-tax impairment charges of $12.3 million related to select CLEC assets and a non- operating investment.

Collectively, these items positively impacted diluted earnings per share under Generally Accepted Accounting Principles by $0.23.

At year-end 2007, CenturyTel's debt to equity ratio was 0.88 to 1 and net debt to full year 2007 operating cash flow, excluding the revenue settlements recognized in the third quarter of 2007, was 2.3 times.

As of June 30, 2007, those ratios were 1 to 1 and 2.6 times respectively.

Overall, 2007 was a solid year financially for CenturyTel, as Glen mentioned earlier, we achieved a record $564 million in annual free cash flow.

During 2007, we completed the Madison River acquisition for approximately $830 million, returned nearly $490 million to shareholders through share repurchases and dividends, invested $326 million in our plant and facilities, and we're still able to maintain net debt to full year 2007 operating cash flow again excluding the third quarter revenue settlements at a solid 2.3 times versus 2.1 times at the year-end 2006.

So CenturyTel continues to maintain a solid balance sheet and is in great shape financially.

Additionally, we believe our strong cash flows and excellent liquidity position allows us to take advantage of opportunities and meet challenges as they arise.

Finally, I would like to discuss the first quarter and full year 2008 guidance provided in our press release this morning.

Let me begin by reminding you that our guidance excludes any non-recurring items that may occur in the first quarter and full year 2008.

Also, first quarter and full year 2008 guidance are based on shares outstanding as of January 31, 2008, of approximately 108 million, which reflects all shares repurchased through that date under our $750 million repurchase program announced in Late August last year.

For first quarter 2008, we anticipate total revenues in the range of $646 million to $656 million.

We expect diluted earnings per share for first quarter 2008 to be in the range of $0.69 to $0.73.

This decrease from fourth quarter 2007 is due to a number of items.

Lower universal service funding that we spoke about on last quarter's call, lower income from the company's equity interest in the wireless partnership, increased marketing expenses, revenue declines associated with access line losses and other telco revenues, the impact of adjusting our effective tax rate in the fourth quarter, settlement of a derivative instrument that will negatively impact other income in the first quarter, and lower interest expense.

These items in the aggregate represent about $0.11 per diluted share.

For full year 2008, we expect operating revenues to be flat to modestly higher than 2007 operating revenues, driven by the full year contribution of the Madison River acquisition versus eight months that were recognized in 2007 and anticipated growth in high speed internet and data revenues, which we expect to offset revenue declines associated with the $42 million of revenue settlements that the we recorded in the third quarter of 2007 that will not reoccur in 2008, lower access revenues, reduced universal service funding, and access line losses.

For full year 2008, CenturyTel anticipates diluted earnings per share to be in the range of $2.90 to $3.00.

I would briefly like to discuss the items outlined in our earnings release this morning that will hopefully assist you in updating your models for 2008 since First Call estimates currently reflect a 2008 diluted earnings per share range of $2.80 to $3.14.

First, further penetration of broadband service offerings and cost efficiencies including incremental synergies related to the Madison River acquisition are anticipated to positively impact 2008 diluted earnings per share by $0.16 to $0.20.

And share repurchases made during 2007 and January 2008, along with lower interest expense are anticipated to positively impact 2008 diluted earnings per share by $0.22 to $0.24.

These increases are expected to be more than offset by lower revenue settlements mentioned earlier that should negatively impact 2008 diluted earnings per share by $0.23 to $0.25, reduced interstate universal service funding which is expected to negatively impact 2008 diluted earnings per share by $0.08 to $0.10 and anticipated access line losses of 4.5 to 6%, continued pressure on access revenues, and expected lower income in 2008 from the company's equity interest in a wireless partnership of $0.28 to $0.30 total for these items.

Also, these items are expected to impact 2008 diluted earnings per share reflect an anticipated effective income tax rate of 37.4% primarily due to the resolution of uncertain tax positions in late 2007.

Finally, from a capital expenditure standpoint, we expect full year 2008 capital expenditures to be approximately $300 million, an 8% decline from the $326 million we spent in 2007.

That concludes my prepared remarks for the day.

At this time, we would be, the Operator will provide further instructions for the question and answer portion of our call.

(OPERATOR INSTRUCTIONS).

Our first question comes from Jonathan Chaplin of JPMorgan.

Your line is open.

If you're on a speaker phone please lift your handset.

Two quick questions.

So I understand that you guys are going to be through the integration process for Madison River some time around the middle of the year.

How do you think about the M&A environment once that's behind you?

How do you, are there, would you be able to do, would you be in a position to do a deal once that integration process is finished in the second half of the year and as you look at the landscape, are there assets out there that are of decent size that are attractive?

And then I'm wondering if you could just give us a quick update on the impact of the economy on operating trends just generally, and what you're seeing on the cable competition site, thanks.

Jonathan, regarding the M&A situation, absolutely, we would be ready to do another deal if the right opportunity arose that fit our strategies that the deal that we believe we can drive long term shareholder value, we would be ready to pursue that as soon as we're complete with this acquisition conversion so there's no question about where we stand there.

Regarding M&A opportunities, there's nothing out there specific today.

There's certainly opportunities that could arise that would be attractive but you never know in this business until something really is there that someone is willing to work toward a transaction, so we're ready but nothing on the horizon that the we know of today.

As far as economic impact and our markets, we're seeing some changes in housing and new housing starts and basically economic indicators that are negative, however we have seen very little impact on our business as a result of the economy out there, so it's not been a major issue for us at this point.

Karen, do you want to talk about cable competition?

Karen Puckett.

In terms of the cable competition, from third to fourth I can't say that the we saw a lot of changes.

I would say just in general I think they stepped up their direct mail and maybe go after verticals a little bit more in terms of adding voice or data as opposed to triple play.

That's great.

Thank you very much.

Our next question comes from Gaurav Jaitly, I'm sorry if I pronounced your name wrong, of UBS.

Your line is open.

Great thanks good morning.

Just a couple questions if I may on the guidance.

First on your access line loss guidance, it looks like you're projecting, just based on the range that you gave here that you will lose fewer lines in 2008 versus 2007, and that would be a reversal of the trend that you've been seeing through the course of this year.

I'm just wondering what do you think are the drivers of that, since you've still got a fair amount of cable competition to go in your footprint and you're talking about some leading economic indicators that are probably negative, just if you could get more color around that, it would be great and secondly on the margins, obviously saw a nice sequential improvement in margins in the fourth quarter, higher than we were looking for, just wondering if this is a good run rate for costs as we look into 2008.

Thank you.

Regarding the access line loss guidance, we're in the same range we projected last year of 4.5 to 6%.

We do have a number of efforts under way that we are hopeful will bring that number down from where it was in '07 but there's no guarantee of that.

Our target to improve, several things we're doing, we're upgrading approximately 60 of our bill payment locations to full customer service centers, where consumers can take care of any service issues and call it really our complete array of services.

We've also been updating these centers to emphasize CenturyTel's positioning in the market as the premier provider of broadband services.

We are deploying an MDU developer sales team to specifically target MDU's and developers in our markets, a number of our markets we have a large number of MDU developments and opportunities there, we believe.

Really about 20% of our residential footprint is MDUs today so we're focused there and then we've initially last year, expanded our save and retention and win back programs to manage really the complete customer life cycle.

We've expanded our customer sales save efforts to include a scaled save desk.

We're currently saving approximately 50% of our customer s that the are calling into disconnect, so these are some of the things we're doing we believe will have an impact on access losses in 2008.

We are going to see more rollout of we believe of VoIP competition but we're targeting some improvements here.

Great, thanks and on the margins?

All the margins, you know, there was some improvement this quarter but we would expect for margins to decline somewhat in '08 just simply because of the loss of the continued loss of the higher margin revenue related to access lines and access revenue, which we expect again to be offset by the growth in our DSL and data revenue which is a little bit lower margin.

On the expense side, the measure increase and expense that we'll see in 2008 is really related to the Madison River properties from the standpoint we'll own for a full year as opposed to eight months.

Just in terms of the absolute level of cost looking from the fourth quarter on, is this a good level for absolute level of cost an the expense site or do you see more opportunities for potentially cutting costs in 2008?

There may be some chance for marginal improvement but we're also doing some things such as Glen mentioned that cost money from a standpoint of the distribution associated with access lines, so and our video products, so I think you may see expenses in marketing and some of these areas the distribution side increase somewhat.

Great, thank you.

Thank you.

Our next question comes from David Barden of Banc of America.

Your line is open.

Hi, guys, thanks for taking the question.

A couple if I could.

Stewart, maybe just on the buyback as we look at the stock price in August, when you launched the buyback, 250 million of the stock was in the high 40s and now it's kind of in the mid to high 30s.

Does the stock price level kind of influence your thinking about how aggressively you want to be in the market or are you trying to be more methodical and stretch this thing out quarter to quarter.

The second if I could, I remember at the Analyst Day we talked about the regulatory outlook that you guys had at the time.

We've obviously seen the new FCC and PRMs on the USF reform.

I was wondering if you guys could give us any comment as to whether you guys are in favor of the direction that the FCC is going and what impact if any you see there, and I'll leave it there, thanks.

Okay, David, thank you.

On the buyback, basically, we have a matrix, we have a 10 B5-1 like plan set up with a broker and in the matrix, the lower the price goes, the more cash we spend basically to buy shares, so the decline in the price does somewhat influence the shares that we purchased, but we are trying to not get ahead of ourselves from the standpoint of using free cash flow to really fund the share buyback.

And I think Karen can speak to regulatory.

In terms of the, on the reforms in terms of kind of three reverse auction, base of support and high cost USF reform, in terms of the auction process, I mean, we are listening and participating in that and fundamentally we don't support it but we will continue to work that process and in terms of -- our objective is to make sure that we have stabilized USF and that the wireless providers only take out based on our cost structure so we're pretty hopeful on that piece and we're looking forward to trying to get a broadband component to the USF.

Also on a positive note, they've opened some comments for the pull attachments and we've been working that one hard in terms of price point.

Our objective there is to get parity with cable.

Perfect, thanks, Karen.

Thank you.

Our next question comes from Simon Flannery of Morgan Stanley.

Your line is open.

Okay, thank you, good morning.

Could you talk about capital spending for a minute?

You're taking the CapEx down about 8% of -- about 11% of revenues.

Is that a good run rate long term and what are the things that you're able to do this year or you don't have to do this year that you've done in years past?

Is there any sort of impact from slower housing growth there and then I think you talked about other revenue being impacted by some settlements around the fiber unit and some CLEC disconnects, just wanted to see some more detail on that and whether that's anything we might see more of in the next couple of quarters, thanks.

Simon, Regarding the CapEx first of all, we invested quite a bit especially the fourth quarter this year in our core fiber network, upgrading it with next generation optimal technology, and improvement capability there.

That's investments we do not have to make this year and also we had some expansion in our wireline footprint, fiber expansion, and some DLC deployments that the we will not make this year so that's where most of the reduction is coming from so not a major impact.

We think we can, excluding any major new initiatives in these areas, and broadband in some way, we think $300 million is sustainable.

Yeah, Simon, in terms of the revenue impact, basically, we had a $2 million adjustment with a customer that was negative in the fourth quarter, in the fiber business and that is something that would not the reoccur.

And the CLEC disconnects?

The CLEC disconnects, if you separate those out from enterprise and wholesale, on the enterprise site we're actually best-in-class in our enterprise churn, so that's not worth that, it's really been in the wholesale side and it's driven by some dial-up business that we had taken over from KMC, and some of the wholesale carriers that have consolidated.

Okay, great.

So and that the should be mostly fourth quarter?

Yes, it's been cycling through the year.

Okay, thank you.

Thank you.

Our next question comes from Mike McCormack of Bear Stearns.

Your line is open.

Hi, guys, thanks.

Just two quick things, on the CLEC asset impairment, Stewart, can you just give us more clarity on what that is and maybe on for Karen, just your thoughts on where you can bring DSL penetration of your primary access lines over time and how penetrated you are in that 10 mega bit product?

Yeah, Mike, on the impairment of the CLEC assets, we own several Markets that were acquired from KMC that were not really core to our CLEC operations because they're isolated from our ILEC business and our CLEC markets as well, as well as our fiber network, and when we purchased these Markets we allocated purchase price based upon the original plan investment that KMC made in the properties instead of looking at the EBITDA contribution.

Had we allocated the purchase price on the EBITDA contribution, impairment would have really been pretty minimal, and we expect to dispose of these markets in the next few months.

Okay.

On your DSL penetration, any kind of additional color around that, what I would say is that we had excellent year-over-year increase in penetration and our objective and strategy, as Glen pointed out before, is to really own that broadband market so we will continue to be aggressive in our inwards.

Our churn is really great.

I mean our churn has been down to about 2.1%, so we have seen a decline in our churn.

We've worked very hard on the actual experience of our broadband customer, and then the other key is just being competitive in the marketplace, so speed plays a part so we feel great that we were one of the first to get the up to 10 meg product we go out and actually advertise that.

We actually do better with that when we migrate existing subscribers up as opposed to a new inward.

Particularly what we see is the new inwards come in either on the vertical, on the entry vertical or on the bundle at 1.5, and then we've had lots of success here in the last couple of quarters of migrating them with more speed.

How ubiquitous is that 10 meg offer, Karen?

I'm sorry?

How ubiquitous is that 10 meg offer?

It's about 50% of what we call our ports which covers a little over 42% of our access line footprint.

When you look at the competitive share between cable, do you have a sense for what the share is both on the install base as well as the flow share during the current quarter?

Yeah, that's alway a guesstimate for us given that we don't cover it, we have lots of different cable competitors and they report on a national basis.

We do think we're winning on the inflow side.

Okay.

Our next question comes from Jason Fraser of Raymond James.

Your line is open.

Good morning.

Just a quick update on web based video service and how that is progressing and just kind of long term strategic plans for that service relative to IPTV and second, just on the idea just give us an idea of what the PC penetration is in your markets and if you have any thoughts about offering a free PC promotion to try to drive more DSL penetration, thanks.

Jason, I'll talk about the broadband TV for a moment.

Our content offering has, we've seen good interest from customers for broadband TV products.

We've had good success in gross ads at least initially, however the broadband TV content still lags cable, it lags satellite, significantly.

The content providers have yet to really determine their internet distribution strategies so they really don't have the content that's needed to compete at this point to the extent we like for it to.

We do expect more competitive content packages in the future but until that happens, the revenue opportunities I believe at least will be limited.

We will see eventually them obtain access to a brought array of content and be able to scale the broadband TV product more significantly, and we do believe that the product with the right content has excellent potential to drive market penetration over time but the content is key there.

And relative to the the PC penetration, we think it's 65 to 70%, and had we thought about PC promotions, we watched the other companies, yes, we've looked at that.

Right now, we feel good about our success with our current high speed and price point bundle offerings that we have, and we would just want to make sure we have the operational issues so we wouldn't say no but at this point, we don't have any plans for that.

All right, great.

Thanks.

Thank you.

(OPERATOR INSTRUCTIONS).

Our next question comes from Tim Horan of Oppenheimer.

Your line is open.

Thanks, guys.

Two clarifications or questions if you don't mind.

One on the pricing front, and Karen, maybe you are best answer to this, do you think you have a lot of ability to maybe raise prices on competitive markets or services and lower them for more competitive products?

Where do you think you are with your whole pricing in terms of retaining customers and penetration?

And then secondly, I might have missed the answer on the stock buybacks, but it seems like with the free cash flow yield that you're at right now would your preference really be to focus on stock buybacks as opposed to paying down debt at this point?

Thanks.

I think you can tell from our financial performance that we've had, we do a good job of managing our price points in general, where we have competitive marketplace, we need to be competitive on our price point and our total value prop, in our non-competitive markets we do have different price points, and I think that you'll see by just our LD performance this year we did increase some prices, and we do believe that there's some opportunities in different product sets that we have that we could increase prices but in general we do have kind of a two prong approach there.

Regarding the stock buybacks, and obviously, we think that this where our stock price is look at the cash flow multiples our stock is a good buy at this point.

We also have to weigh the value of a strong balance sheet and less leverage that gives us flexibility of our future growth, so we weigh those but we definitely, we are buying stock back and we think that it's a good investment right the now.

Thank you.

Our last question comes from Thomas Egan of JPMorgan.

Your line is open.

Thank you for taking my question.

I just wanted to follow-up on Jonathan's M&A question, and I know you guys probably get tired of getting this question, but in the past, you've typically been successful with acquiring small to medium sized firms that you've integrated into the business.

You know, even way back into the 90's, but this year, there's going to be a couple of companies that some time around the mid year will be freed up from some tax lock-ups that they have that the don't allow them to combine with other firms.

So I guess my question SR you also open to much more larger transformational M&A possibilities with firms that may be of equal size to yours in addition to the sort of blueprint that you've used in the past?

We are certainly open to acquisitions of larger companies.

I don't know if we are willing to be acquired, but if that's your question, our expectations as a Company are to remain independent.

We have a proven ability we believe to drive shareholder value over time as a standalone Company and we expect to continue down that path.

We do believe there will be continued opportunities to grow through acquisition, Thomas, and we believe that over time, that we'll see transactions that we believe will drive long term share holder value and be successful in those, however you never know until they happen, but our expectations are to remain independent, but we are certainly open to large transactions.

Great, thank you.

Thank you.

There are no further questions at this time.

Please proceed with any closing remarks, Mr.

Post.

In closing, CenturyTel concluded 2007 with strong fourth quarter and full year financial results.

We believe we are well positioned as we enter 2008.

We will remain focused in the months ahead on being the broadband provider of choice in our markets and improving customer retention and expanding our market share.

We remain committed to utilizing our strong cash flow and solid financial position and to drive shareholder value over the long term and we appreciate your participating in our call today.

We look forward to speaking with you in the weeks and months ahead.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program.

You may disconnect and have a nice day.