Lumen Technologies Inc (LUMN) 2009 Q1 法說會逐字稿

Good morning. ladies and gentlemen. And welcome to CenturyTel's first quarter 2009 earnings conference call. At this time all participants are in 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 conference call is being recorded. I would now like to turn the conference over to Mr. Tony Davis, Vice President of Investor Relations. Mr. Davis, you may begin.

Thanks. Good morning, everyone. And welcome to our call today to discuss CenturyTel's first quarter 2009 earnings results released earlier this morning. During today's call we will refer to certain non-GAAP financial measures, 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 our call 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 selected information regarding 2009 and the impending Embarq transaction and other outlooks in our business.

So, we ask that you please review our Safe Harbor language found in our press release and in our SEC filings which describe factors that could cause our actual results to differ materially from those projected by us in our forward-looking statements statements. Our call today will be accessible for telephone replay through May 6, 2009 and accessible for webcast replay through May 20, 2009. For anyone listening to a taped or web recast of this call or for anyone reviewing a written transcript of this call please note that all information presented is current as of April 30, 2009, and should be considered valid only as of this date, regardless of the date listened to or reviewed. At this time I will turn call over to your host today, Glen Post. Glen?

Thank you, Tony. And we appreciate you joining us today as we discuss CenturyTel's first quarter 2009 operating results and our guidance for second quarter 2009. Diluted earnings per share excluding nonrecurring items was $0.82 for quarter or $0.01 ahead of the upper end of our previous guidance and $0.02 higher than the First Call consensus of $0.80 per share. Operating revenues excluding nonrecurring items for the quarter were $635.4 million, which was toward the upper end of our previous revenue guidance of $628 million, to $638 million.

Our revenue increases during the quarter were approximately $11 million resulting primarily from growth associated with our 13.5% increase in high speed internet customers. These increases were more than offset by revenue declines of approximately $24 million primarily attributable to previously anticipated access line losses and lower access revenues. We continue to see strong demand for broadband services during the fourth quarter as we achieve growth and data revenues of 10.4% over the first quarter of 2008. This increase is primarily driven by the addition of approximately 79,000 high speed internet subscribers during the last 12 months. We also generated strong free cash flow of $170 million in the first quarter. We continue to see steady demand for high speed internet product as we added over 24,000 net subscribers during the first quarter representing a 3.8% sequential growth in broadband customers and an 81% improvement, over net additions in the fourth quarter of last year. Additionally, our high speed internet charge is at an all time low which is encouraging.

We also ended the quarter with more than 665,000 high speed internet subscribers or over 38% penetration of DSL enabled lines and almost 34% penetration of total lines. We experienced access line losses of 31,700 during the quarter, resulting in 6.7% line loss over the last 12 months. Access line losses continue to be a concern. However, we are seeing an increase in inward activity which is up over 1% due to the success of recent marketing initiatives. We also continue to experience solid demand for our satellite video product, as we added over 17,800 customers during the first quarter, and ended the quarter with more than 130,000 satellite video subscribers. We ended the first quarter with 9.5% satellite video penetration of primary residential lines, up from 4.9% just a year ago. Our IPTV offering in Colombia and Lacrosse also continued to drive solid customer growth and have a very positive impact on customer loyalty.

Before turning the call over the Stewart, I want to make a few comments regarding the pending transaction with Embarq. First, I want to clarify our expectations regarding dividends. As we stated at the time of the Embarq announcement we expect both companies to continue to pay their respective quarterly cash dividends on common stock through the merger close. Earlier this year, CenturyTel and Embarq agreed to set the same record date for our respective first and second quarter 2009 common stocks dividends. We also anticipate continuing CenturyTel's current quarterly cash dividend of $0.70 or $2.80 on an annualized basis after the merger closes. Concerning our integration effort, as know we received our Hart-Scott-Rodino approval in late November and shareholders of both companies overwhelmingly approved the merger on January 27.

We continue to work to obtain the five state approvals that remain in process. And we're in regular communications with the SEC as we work to obtain approval of our transfer of control application at the federal level. We believe we're on track to receive all these remaining approvals and close of transaction, during the second quarter. Our system integration and IT transition planning efforts have resulted in significant accomplishments over the past quarter. Our system integration and IT transition planning efforts have resulted in a -- our transition teams excuse me, composed CenturyTel and Embarq personnel is diligently at worth planning integration of the two companies so we can begin the process immediately after closing. As announced previously, we expect to realize substantial operation and revenue synergies in the months ahead and the transaction is expected to be free cash flow per share accretive in the first full year after slowing excluding one time integration costs.

Also the combined Company will be financially strong with pro forma leverage of 2.1 times operating cash flow including synergies on a full run-rate basis. We're excited about this combination as it creates a larger, stronger Company which we believe will be well positioned to significantly increase shareholder value in the months and years ahead. With that I will turn the call over to Stewart to provide additional detail on our results for the first quarter. Stewart?

Thank you, Glen. During the next few minutes, I will cover some of the highlights of our first quarter 2009 operating results and briefly discuss additional financial matters. I will conclude my comments this morning with a discussion of second quarter 2009 guidance provided in our earnings release issued earlier today. Since we reported a number of nonrecurring or one-time items during the first quarter I want to make a few remarks regarding those items before I discuss the first quarter normalized results with you.

First, in 2008, CenturyTel's Board voted to discontinue the company's supplemental executive retirement plan. The termination resulted in the recognize of a one-time aggregate after-tax charge of $10.9 million, in the first quarter of this year. Second, upon the successful completion of an amendment to Embarq's credit facility, announced in late January, that becomes effective upon the closing of our pending transaction, CenturyTel terminated the committed bridge credit facility we entered into with selected investment banks at the time of the Embarq acquisition was announced. CenturyTel recognized a one-time $5 million after-tax charge in the first quarter associated with this facility. The good news is that the amendment to Embarq's credit facility will have a lower interest rate than other financing alternatives, therefore, effectively lowering the combined Company's ongoing interest expense.

Third, we recognized $4.7 million of after-tax costs related to integration expenses associated with our pending acquisition of Embarq. And finally, these three items were partially offset by a $5.8 million tax benefit associated with the reduction of a deferred tax asset valuation allowance. In the aggregate, these four items negatively impact GAAP earnings for the quarter by $0.15, however, these items benefit CenturyTel prospectively through lowering future retirement and interest expenses and preparing us for the integration of the Embarq following the close of the transaction. So with that overview of the one-time items which are also discussed in our press release, and related financial schedules released earlier this morning, let's turn our attention to normalized results for the first quarter 2009, excluding these one-time items compared to normalized first quarter 2008 results. For first quarter 2009, operating revenues decreased 2% to $635.4 million near the upper end of our prior guidance from $648.6 million in the first quarter year ago.

Voice revenues for the first quarter 2009 were $209.9 million versus $220.5 million in the first quarter 2008. This 4.8% decrease in voice revenues was primarily driven by revenue declines associated with anticipated lower access lines. Network access revenues were $191.8 million versus $208.7 million in first quarter 2008. This $16.9 million decline was driven by revenue declines associated with lower intrastate minutes of use and lower interstate revenue requirements, a trend we have seen for some time now. Our data revenues increased 10.4% from $126.8 million in first quarter 2008, to $139.9 million in the first quarter of 2009, primarily driven by strong high speed internet customer growth and demand for high bandwidth services during the last 12 months. Fiber transport and CLEC revenues increased 4.7% to $41.5 million in first quarter 2009 from $39.6 million in the first quarter 2008. Our other revenues were $52.2 million compared to $53 million in first quarter a year ago.

Operating expenses decreased 1.7%, from $465.1 million in first quarter 2008 to $457.4 million in first quarter 2009, primarily due to a reduction in depreciation expense. The increase in bad debt expense referenced in our press release was primarily due a $3 million positive settlement recorded with a -- positive settlement with a carrier recorded in the first quarter of 2008. As we discussed with you during our fourth quarter earnings call on February 19, noncash pension expense will be higher in 2009 than in 2008 due to performance of the financial markets over the last couple of years, which is the case for most if not all companies with defined benefit plans. In the first quarter we recorded approximately $3.4 million in nonincremental noncash pension expense compared to first quarter a year ago.. In the first quarter 2009 our operating cash flow margin was 48.1%. Operating income for the first quarter 2009 was $177.9 million compared to $183.5 million in first quarter 2008. Other income, was approximately $1.7 million higher in first quarter 2009 than in the same quarter a year-ago, due primarily to income from a wireless partnership in which CenturyTel owns an interest. Net income attributable to CenturyTel for the quarters with $81.9 million compared to $86.2 million in first quarter 2008.

As Glen mentioned earlier, first quarter diluted earnings per share was $0.82 compared to $0.80 in first quarter a year ago as a result of 7.1% fewer average dilute shares outstanding versus the same period a year-ago. Turning to capital structure, overall our first quarter results were solid and in line with, or a little better that our initial expectations. As of March 31, 2009, CenturyTel's debt to equity ratio was .95:1, and net debt annualized first quarter 2009, operating cash flow was 2.5 times. So CenturyTel continues to generate strong cash flows, maintains a solid balance sheet, and is in great shape financially. I want to make sure that everyone understands that all financing related to the Embarq transaction is in place. You will recall that on January 23, CenturyTel and Embarq jointly announced that Embarq had entered into an amendment to its current revolving credit facility with its current bank group that is effective upon the close of the transaction. This amendment to Embarq's credit facility eliminated the need for the $800 million financing commitment letter that CenturyTel had secured at the time of the transaction announcement last October. Additionally we believe our strong cash flows and excellent liquidity position us to continue to take advantage of opportunities and meet challenges as they arise.

Finally I would like to discuss the second quarter guidance provided in our press release this morning. First, the outlook information in the release we issued this morning, and my prepared remarks are for CenturyTel only, and do not include the impact of the pending acquisition of Embarq. Additionally, costs incurred by CenturyTel in 2009 were related to the pending Embarq acquisition will be treated as nonrecurring items, and therefore, are also not included in the outlook or my comments. For second quarter 2009, we anticipate total revenues in the range of $628 million to $638 million. We expect diluted earnings per share for the second quarter of 2009 to be in the range of $0.77 to $0.81. This decrease from first quarter 2009, is primarily due to seasonal increased outside maintenance activities and the impact of annual wage adjustments which were effective April the 1st. And this is really consistent with last year as well where our expenses were up, somewhat in second quarter, versus first quarter, due to seasonality. That concludes my prepared remarks for today. At this time I'll ask the operator to provide further instructions for the question-and-answer portion of our call.

Thank you, sir. (Operator Instructions) And our first question comes from Batya Levi from UBS.

Thank a lot. Just wanted to ask a question on line losses. Can you talk about the drivers of the improvement? Are you seeing less competition from the cable providers, or maybe fewer disconnects to wireless only plans? And my second question is, MNA opportunity. Verizon in its earnings call suggested that it would continue to rationalize its residential wireline business. Assuming that means that they will mainly focus on the FIOS footprints and maybe look for opportunities to sell the nonFIOS lines that could be a couple million lines. Would be interested in acquiring that footprint? Thanks, so much.

Batya, this is Karen puckett. In terms of access line loss I would say from a cable competition standpoint we really haven't seen much change. It has been pretty consistent. I think our improvement really is around as Glen said we had some improvements in inwards. The acceleration we saw on the residential side is really a noncompetitive, noncable voice active markets. And then on the business side I would say that, cable is making an impact on the smaller markets and some businesses are downsizing, with lessen in, but I think through our bundling and small tactical focus with the save teams and the call center channels that we're doing a very good job in this environment.

Batya, as far as the acquisition and the Verizon lines, our focus right now is obviously on the integration of the Embarq operations and CenturyTel and the combination of our companies and that will be our laser focus in the months ahead. I would say in 18 months from now we somebody in a position to consider other lines. We would certainly be interested in Verizon lines in certain areas, certain markets where we have synergies especially available to us, but right now we're focused on the Embarq transaction.

Okay thanks a lot.

And our next question comes from Jason Armstrong from Goldman Sachs.

Thanks. Good morning,. Couple questions. First on just some of the economic trend. Wondering if you guys can sort of take us through the months of the first quarter. Reason being couple of the big cable companies in the last couple of days have talked about changing activity through the quarter where January and February was okay then March and April trend rates really dropped off in terms of subscriber metrics. So any color there in terms of whether you're seeing that in your business or not. And maybe just a follow-up on the MNA question. You guys had the balance sheet positioning that is really unrivaled in the space and allows you to do these type of deals. What in your mind creates this sort of 18 months target until we can do something else? Are there certain milestones attached to that whether it is getting billing systems integrated with Embarq, or getting unified branding out there? Just wondering what contributes to that, thanks.

Jason, first of all, the economic impact, we are seeing some impact due to the economy and we will continue to see that as virtually every company in our industry and every other industry will see in the months ahead until things turn around. Primarily we're seeing reduce business starts, some business downsizing, cost cutting and grooming of networks by Enterprise customers. However on the process side our customer churn based customers Enterprise segment has been relatively flat from year even two years ago. So that has been had a big impact on just customer losses there. And on the consumer side, we're seeing consumers looking for value, looking to reduce costs where they can.

Some I think we know going to the wireless only communications in the home, we expect the economy to continue to put pressure on voice lines and on revenue, but we also expect and continue to see good demand for broadband services and for video services in the months ahead in spite of the economic issues our nation is facing. As far as any uptick in issues in March and April, we always have a -- April is always, a little bit of a difficult month, but it is not -- really it is pretty much in line of our expectations. We have not seen any major economic impact the last two months.

Okay, great. And on the M&A question?

On M&A as far as 18 months, it is not financially driven, of course. We have the strongest balance sheet in our sector. It is more about just getting this done -- the Embarq transaction done and done right, getting the billing systems converted timely, getting the branding done properly, all those things that are just inherent in make this a successful transaction and getting the -- driving the synergies. We have to get our synergy numbers.

So is the message you would want to be on the other side of both unified branding and billing system integration to really consider further M&A and that is sort after creates the 18 month timeframe?

Yes, at least on the far end of it anyway or the down side of getting it done, yes.

Okay, great, thanks.

Our next question comes from Simon Flannery from Morgan Stanley.

Thanks a lot. Good morning. Now that you have had more time to get into the broadband stimulus what are your current thoughts in terms of the opportunities there for CenturyTel and for Embarq as well? And could you just update us on your wireless plans and with the LTE seemingly starting to come together and some carriers talking about deployment in 2010 what are your latest thoughts there? Thanks.

Well, first of all, broadband stimulus, we continue to look at those opportunities. We think they could have pretty significant impact in our ability to bring broadband services to a lot of the rural areas we cannot afford to bring services to today. I think, we -- a lot of it depends on the decisions that are made as far as distribution of funds. What all the funding eligibility requirements will the Feds require, open network obligations or reporting requirements or a certain broadband speeds that are not possible in some of these rural areas at any kind of affordable rate. These are concerns we have. Also we think there is a lot of opportunity here and we're going to be looking closely at opportunities to drive broadband deeper in our network with the use of these incentives funds.

As far as wireless and LTE timing, we think it is going to be probably mid-2010 before there is equipment that is really available for us to do what we believe will be some good -- a couple of good trials. So, LTE is progressing. We get good reports of course, AT&T and Verizon are both committed to the LTE at least long term in their networks. We believe that it will bring really a lot of opportunity to bring wireless broadband to rural areas and reach areas that possibly we could not reach previously, also we're considering opportunities with the incentive funds to possibly utilize those funds to help build some of the 700 megahertz for us in those rural management. So we're still very positive on what he we think it can do for customers in rural areas and also a really good opportunity for us to expand our broadband offering, provide a mobile broadband and mobile voice offering over time to customers in rural areas.

Great, thank you.

Our next question comes from Chris King from Stifel Nicolaus.

Good morning. Two quick questions for you. First of all, I just wanted to get an update on the branding process for the new company, whether you guys are planning to really hit the ground running on kind of day one upon closing of kind of roll out a new brand name across the footprint, or how that timing will work upon closing. And secondly, there is obviously a lot of data that you guys have seen I guess and have not seen related to Embarq. But just was wondering in some of their larger clusters specifically Las Vegas and some of their Florida markets, whether you seen any change in trend in recent months that would either -- that you would either respond to more negatively or more positively than they have been over the last couple of quarters. Thanks.

Okay. First of all, Chris on the branding process for the company, we will like to hit the ground running within the branding the name on day one. That is a board decision. But our preference and I think the board's preference is -- both board's preference would be to do that. So that is our target. We can't guarantee anything because that is a function of two boards making a decision, or coming together and making a quick decision. So that would be our preference and we're certainly from a management standpoint in a position to move in that direction. As far as some of the larger markets and trends, obviously Las Vegas and Florida are getting hid hard with the real estate issues and the economy. That -- we knew that going in. No surprising there. We were in the middle of this economic downturn when we made the decision to consummate this transaction.

What we are finding is, I believe, even more opportunities. The more I visit these markets, opportunities to drive revenues and to create synergies in the Embarq areas that are really significant, we bring out -- especially we bring our operating model which is more local focus model, with more accountability to local market level. And we bring our -- leverage our light cord network to bring the broadband content and broadband too through -- broadband transport to areas that reduced cost to a greater extent than we expected. We also with our IT systems, billing systems, we think we're going to create a better customer experience and reduce costs significantly from a customer service standpoint. So, we feel really positive about what we're seeing. And I am very confident we're going to hit our synergy numbers.

Thank you.

Our next question comes from Chris Larsen from Piper Jaffray.

Hi, thanks. First question just wanted to ask a little about the five states that remain. If you could give us a sense for what the sort of long [full] intent maybe with whether they are discussing any concessions, or is this just a functioned going through through the motions? And then I have another one after that.

Yes, it is really just from the standpoint of going through the motions. We have had a each state has their own process and we have just had to work through that process. The five states remaining, are California, which we actually received -- there is an order that will be on their consent agenda I think next week, that has no conditions. We're waiting on Washington, Oregon and Pennsylvania. And I guess maybe Virginia is the last state that we have on the list. So again, we -- each state is getting close to the final process, and we hope to wrap up this so we can get closed in the second quarter as we've said.

Yes, Chris I will just add to that we have such positive leverage here, low leverage best in our sector. That is very positive from a state regulatory standpoint. And this transaction is really good for customers and the communities we serve and all these states. It has really been a pretty painless process, because I think the regulators see this is a very positive transaction for customers and communities.

Excellent. And that actually leads me to my next question which was, you are in one of the best leverage positions of your group today. Can you give us a sense for where your comfort level is in terms of going how high up would you feel comfortable levering up to, and are any of the states imposing restrictions on the leverage given what is going on with Fairpoint?

No, we have had no state impose any restrictions on leverage. We have maybe one state or two states where there are tremendous restrictions on dividends if the equity -- the market equity of the parent company, goes below a certain level. But it is not anything that is significant, not anything we're real close to and these were smaller states as well. So in terms of how much leverage we would be willing to take on, we have had a visit with the rating agencies and they expect to go to committee and come out sometime close to the acquisition closing date. We do expect to remain investment grade on the combined basis. Our leverage target or max level with the S&P was about 2.7 times. Embarq's was about 2.5 times. So I would expect that when we get targets from them they will be around the neighborhood of the 2.5 times because nothing much has changed since those targets were set.

And that is a level you feel comfortable that if you saw an acquisition 18 months out and you had deleveraged then, you would feel comfortable moving back to that 2.5 level?

Yes, we'd feel comfortable. We should be when we close about 2.1 times levered on an annual basis.

Great, thank you very much.

A little cushion there.

Our next question comes from Todd Rethemeier from Hudson Square.

Hi, thanks. Just we saw a nice increase in the data revenue line this quarter. I'm just wondering what was driving that if there was anything one time at that because we're not seeing that at other telco's this quarter.

I think primarily, Todd, it was the increase in our DSL penetration and our average revenue, per unit, has increased. The customer is losing ARPU, than we're gaining. So that has been a positive point. Actually if you take a look at consumer ARPU was up over 8% year-over-year and business ARPU at 5.5% year-over-year. So that is really what is driving it. It is the data piece that is driving at ARPU and it is primarily a DSL and going to -- selling up to higher speeds to great extent as well.

So safe to say both business and consumer are driving it then?

Yes, that's right.

Okay, thanks.

Our next question comes from [Donna Yagers] from DA Davidson.

Hi, guys, thanks for taking my questions. I was curious. Congratulations on the good DSL net adds. I was wondering if you were running any special promotions that drove that.

No, Donna, we didn't do anything special this quarter. Actually we increased prices a little in this area. So nothing special. Just a little different approach to the market than we have had in the past, but no special promotions this quarter versus last quarter.

Then I know you guys have put in I think 80 SL2+ to drives your speeds up to three mega-bits. Can you talk about your plans for -- obviously the cable guys are competing on higher speeds and you seem to be keeping up with that. What are your plans going forward as far as putting in higher speeds for DSL?

Right now we have 63% of our enabled lines have up to 10 mega-bits service. And we say up to because most of those customers get 10MEGS, but we don't guarantee it so, we say it's six to 10 really. So, did we have really made a lot of progress there. We will continue to focus on that area with the Embarq acquisition. We will be focusing on doing the same thing there and bringing those speeds up. The -- and we think it is a really an opportunity to continue to bring -- drive revenue and ARPU. Might mention, one of the items is just the bonding capabilities. If we can -- when bonding is really working now and it is being perfected, we have very little of it in our network and really you can double your broadband speeds with bonding. So it is a real opportunity for us in the months ahead.

Great. Then just one clarification on an earlier comment you made about the regulatory process. You said that some of the smaller states were putting restrictions on dividends. You mean dividending money up from those states to the parent company?

Yes, that's correct, Donna.

Okay. And then I know in Washington state you guys have entered into an agreement with the interveners there. It sounds like part of it was over interconnection. Is that a big change? Was Century not -- since you're not a bell you obviously weren't required to interconnect with the [CLIX] -- not with the [CLIX], but with some of the other telecom providers. Can you talk a little about if you're giving up in this interconnection agreements what does that really do for you guys?

Yes, Donna that that, it is a change for us. We don't think it will have a significant impact on our operation in Washington. We don't expect it to be a significant issue for us.

The biggest thing is we, CenturyTel, basically have not been large enough to have an electronic interface for the wholesale customers to let them come in and provision the customers off of our network. And we're going to basically integrate the e-system that we're picking up from Embarq and that will allow the integration of of our network with that system to allow wholesale customers to provision off of our network.

Okay. And was Washington state the only state where you signed such an interconnection agreement or was that sort of done in other states as well?

No, I think it was done in other states as well.

Okay. Thanks guys.

Our next question comes from Frank Louthan from Raymond James.

Great, thank you. Looking at some of the results from other carriers clearly the cable companies and certainly the [ARBOCs] had a little success ahead of the first date for DTV transition getting some video subscribers. Probably think that will happen again in June. Any plans for making any sort of special marketing push for satellite ahead of the June DTV transition? And do you think that you're ever going do see a need to expand your IPDV offering outside of Lacrosse, maybe into some of your other markets? And then, lastly, what systems are you going to target to switch over, first from Embarq? Thanks.

Yes, first of all, we're looking at those opportunities with the -- as far as the marketing opportunities on video side, Frank, we would rather not talk about what we're going to do there because of competitive reasons. We do think there is opportunity to push video in the Embarq markets, to provide IPTV service in a number of those markets. They are much more dense than the markets we serve in several areas. We have not made any decisions there, but we believe there is real opportunity there and we will continue to -- as we get this transaction closed, we will be looking really closely at those opportunities in the weeks and months ahead.

Yes, in terms of the systems conversion, we're going to convert the -- their customers in the state of of Ohio first, to CenturyTel's customer care and service system, and expect to have what done hopefully sometime in the third quarter. And expect to convert the ERP systems over to our ERP systems some time hopefully early fourth quarter.

Okay, great, thank you.

Our next question comes from Tom Seitz from Barclays.

Thanks for taking the question. Interesting comments on the potential for IPTV and Embarq areas. I was wondering without naming names or naming markets, do you think since it will take you a while to get billing and provisioning done in some of those Embarq markets, that there will be an expansion of IPTV on the CenturyTel legacy properties in some areas within the 18 months that it may take you to complete the cutover of the systems?

Yes, Tom, we are considering a couple of what we call IPTV light trials in the coming months. Basically what we're using 10 mega-bits. We have had a lot of success in Lacrosse -- the IPTV market in Lacrosse, Wisconsin, without HDTV and without DVR capabilities. And so we're going to trial in a couple other markets where we don't have -- that aren't very dense, that we don't have the broad band speed capabilities to get the 25 to 30 mega-bits we expect to get in more dense markets, so we have some trials planned there. So yes, we will be doing some work in some some smaller, very selective, cases of some of our markets this year.

Just a quick follow-up. Are you taking pair bonding out of the lab right now, or were your comments related to that a little bit futuristic?

Yes, we're actually trialing it now. It is working in the lab and we expect to be -- we are actual using bonding today in Lacrosse and some areas and have had success with it, so it is just matter of perfecting it. It is working.

Okay, great, thank you very much.

Thank you, the ladies and gentlemen. And this concludes our question and answer session for today's conference. I would now like to turn the call back over to Mr. Glen Post for any closing remarks.

Yes, in closing, CenturyTel did achieve solid results for the first quarter. We're encouraged by the improvement in access line and broadband subscriber performance in the first quarter compared to the fourth quarter of 2008. We also continue to work diligently toward completing the Embarq merger which we believe represents a great strategic combination that will diversify our market and expand our addressability market for IPTV and fiber transport connectivity. And in addition our combined high quality broadband networks and IT systems along with our enhanced financial and operational scale should provide significant advantages for our customers in the months ahead. We appreciate you participating in our call today, and we look forward to speaking with you in the weeks and months ahead. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may all disconnect, and have a wonderful day. Thank you