Tony Davis - Vice President of Investor Relations Glen Post - Chief Executive Officer, President and Director R. Ewing - Chief Financial Officer and Executive Vice President Karen Puckett - Chief Operating Officer and Executive Vice President

Michael McCormack - Nomura Securities Co. Ltd. Kevin Smithen - Macquarie Research Batya Levi - UBS Investment Bank Simon Flannery - Morgan Stanley David Barden Unknown Analyst -

Good day, ladies and gentlemen, and welcome to CenturyLink's First Quarter 2011 Earnings Conference Call [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.

Thank you, Saeed. Good morning, everyone, and welcome to our call today to discuss CenturyLink's first quarter 2011 results released earlier this morning. Unless otherwise noted in the press release, our NI [ph] remarks and related materials this morning, the first quarter results discussed in the press release and during this call relates solely to legacy CenturyLink, Inc. Therefore, unless otherwise noted, they do not include results of operations request. The slide presentation we will be reviewing during the prepared remarks portion of today's call is available on CenturyLink's IR website at ir.centurylink.com or the Investor Relations section of our corporate website at www.centurylink.com. At the conclusion of our prepared remarks today, we will open the call for question and answer. On Slide 2. You'll see our Safe Harbor language. It's there for your information. We will be making certain forward-looking statements today, particularly as they pertain to guidance for 2011, the integration of Embarq and Qwest, the pending acquisition of Savvis and other outlooks in our business. Now moving to Slide 3, we ask that you also note that our earnings release issued earlier this morning and the slide presentation of remarks made during this call contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on our earnings release and on our website at www.centurylink.com. This slide also contains additional disclosure information related to the recent CenturyLink and Savvis merger agreement announcement. We ask that you review our Safe Harbor language and these additional disclosures found here as well as 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 those forward-looking statements. Turning to Slide 4, your host today is Glenn Post, Chief Executive Officer and president of CenturyLink. Joining Glenn on our call today is Stewart Ewing, CenturyLink's Chief Financial Officer. Also available during the question and answer period of today's call is Karen Puckett, CenturyLink's Chief Operating Officer. Our call today will be accessible for telephone replay through May 11, 2011 and accessible for webcast replay through May 25, 2011. For anyone listening to taped or webcast replay of this call or for anyone reviewing a written transcript of today's call, please note that all information presented is current only as of May 5, 2011 and should be considered valid only as of this date, regardless of the date listened to or reviewed. So as you turn to Slide 5, I will now turn the call over to your host today, Glen Post. Glen?

Thank you, Tony. We appreciate you joining us today as we discuss CenturyLink's first quarter 2011 operating results, as well as selected operational updates and 2011 guidance information. We achieved solid financial and operational performance for the first quarter of 2011, even as we worked toward an April 1 date for the closing of our acquisition of Qwest and the launch of the combined company. Operating revenues are at the top of our guidance and diluted earnings per share exceeded the top end of our guidance and we also achieved solid high-speed Internet subscriber growth in the first quarter and continue to see improvements in access line declines. Now moving to Slide 6 in the deck, we achieved operating revenues of $1.7 billion for the quarter, the top end of our guidance. Diluted earnings per share excluding special items was $0.76 per share, exceeding the top end of guidance by $0.06. Our cash flows remained strong. We generated free cash flow of $528 million during the quarter. There were several factors contributing our operating revenues meeting the top end of our previous guidance for the quarter. First of all, we lost fewer access lines than we had forecast for the quarter. Second, access minutes of use declined at a slower rate than we had anticipated, and demand for our strategic product and services continues to show strong growth. And strategic revenues continue to increase as a percentage of total operating revenues. In first quarter 2011, strategic revenues accounted for 31% of total revenues compared to 27% in the first quarter of 2010. The growth in strategic revenues as a percentage of total operating revenues is a positive trend that we are focused on continuing in the months ahead. Also, we continue to enhance our broadband product portfolio through deploying higher speeds in key markets, as well as adding incremental value through broadband features such as computer support and online backup services. In the first quarter, we maintained our overall go-to-market approach, but continued to refine our segmentation, our messaging, our bundled and tools for our sales channels to drive customer growth and average revenue per customer per unit. We also continue to enhance and expand our advanced data, our IP networks and value-added services for business and enterprise customers. Overall, monthly recurring revenues continue to look solid in enterprise, our sales for Strategic Products, which included the net [ph] and MPLS direct Internet access, were up 18% year-over-year and first quarter '11. Additionally, we saw an increase of 31% year-over-year sales -- in these sales to new customers. Enterprise recurring revenues are down slightly year-over-year and grew slightly on a sequential basis, thanks to growth in data products, particularly retail ethernet. Also, direct Internet access was a bright spot within enterprise, with 31% year-over-year growth. Loss revenues continued to decline in both enterprise and the SMB space, with loss revenues down 13% year-over-year in our enterprise operation. Now turning to Slide 7, I'd like to cover a few operating highlights for the quarter. First, we added more than 52,000 high-speed Internet customers during the quarter as demand for broadband remains solid and customers continue to respond well to our broadband offers. We ended the quarter with approximately 2.45 million high-speed Internet customers or 40% penetration of total addressable lines. In addition, we continue to see improvement in our rate of access line decline as we continue to focus on new customer acquisitions by targeting the non-customer base, as well as enhancing our retention programs. Our first quarter line loss of approximately 106,500 represents a 13.6% sequential improvement over the fourth quarter of 2010 and a 15.2% improvement over the first quarter of 2010 access line loss level. We continue to see a decline in disconnect orders in both the Consumer and Business segments, which we believe is attributable to a more stable economy resulting in fewer moves, less business line downsizing and fewer competitive ports. And we're pleased that we have been successful in reducing our rate of access line loss for the trailing 12 months to 7.5%, a reduction of 8.1% reported in the first quarter of 2010. One of the keys to this ongoing improvement in customer loss has been the performance from the top 5 Embarq markets. We continue to see strong traction in these markets and improvement continues to outpace the rest of the company. We continue to see strong results in DIRECTV sales, as we added more than 34,000 satellite video subscribers in the first quarter. We ended the quarter with almost 662,000 satellite video customers, that's about a 15.4% penetration of primary residential lines. We've also soft launched our Prism link -- excuse me, our CenturyLink Prism service in 3 new markets in Tallahassee, in Orlando, Florida; in Raleigh; Durham, North Carolina, making our Prism services available in a total of 8 markets now. The number of Prism capable households passed -- increased nearly 22% in the first quarter, and we continue to expect to pass close to a million households by the end of the year. We were pleased with the overall progress we are making with our Prism TV service thus far, and are confident we'll continue to see growth in this area. We continue the success in driving broadband penetration and our success in both satellite video and Prism TV sales helped improve consumer average revenue per unit by $1.11 or 2% in the first quarter of 2011 over the first quarter of 2010. And finally, we have begun reselling Verizon wireless products and services to small business customers in CenturyLink markets. Our consumer launch is scheduled to begin in mid-May in select markets and will be expanded to all markets over the next several months through a phase-in approach. Turning now to Slide 8. We continue to make great progress toward completing the integration of Embarq. We completed our fourth marketing conversion. All customers in the state of Florida were converted in March and we now have approximately 75% of Embarq customers on CenturyLink systems. We also remain on schedule to complete the fifth and final Embarq customer billing conversion comprised of customers in 11 states during the third quarter of this year. We continue to meet our synergy targets and on track to achieve our expected $375 million in operating expense synergies as we projected. Now moving on to Slide 9. We are pleased to have closed our merger with Qwest and launched the combined company on April 1. The excellent work conducted by our integration teams and employees of both companies has resulted in a very smooth transition for us. We have heard positive feedback from our business customers about the value proposition they see in a company with greater scale, with an enhanced product portfolio and broader access footprint. We've also implemented CenturyLink's local operating model across all of the Qwest markets now. I believe our strong results for the first quarter, combined with a smooth transition to the combined company, demonstrates the ability of our employees to executive our business plans while undertaking the complex job of combining our 2 companies. Our integration efforts for the Qwest operations are off to good start. We remain on track to complete the conversion of Qwest financial and human resource sources systems to our SAP platform by year-end. Additionally, network grooming activities are underway which continue over a number of months. Even with the significant cost reductions achieved by Qwest since we announced the merger a year ago, we continue to expect to achieve operating expense synergies of $575 million for the next 3 to 5 years, and capital expenditures synergies of $50 million in the next couple of years. We currently expect to achieve $80 million to $100 million in operating expense synergies from the Qwest acquisition in 2011 and we expect to exit 2011 at an annual run rate of about $200 million in synergies. As we turn to Slide 10, I want to briefly touch on the Savvis merger agreement that we announced last week and why we think this transaction is such a good fit for both CenturyLink and Savvis. First, the acquisition of Savvis, really a positive, logical next step for CenturyLink. We believe the combination of CenturyLink's network and hosting assets with Savvis' assets will provide an exciting new platform that will enable us to capture growth in Managed Hosting, Cloud Computing and Colocation businesses. The CenturyLink-Savvis combination really is about growth. Together, we will create a premier managed hosting and cloud provider with global scale. Additionally, this acquisition will further diversify revenue mix toward a higher growth business segment. With Qwest and now Savvis, approximately 58% of our revenues will come from business customers. It's also important to note that this transaction has a minimal impact on our leverage, allowing us to maintain our strong financial position and we're pleased to have received confirmation of our credit ratings by all 3 credit agencies, leaving the company with 2 of 3 ratings at investment grade. Also, the addition of Savvis will provide a clear path for the integration of the legacy Qwest Hosting business. So overall, the Savvis transaction makes strong strategic sense for our company. Turning now to Slide 11. The combination of CenturyLink and Savvis will position CenturyLink as a global leader in managed hosting cloud computing, which is growing at a rate of about 20% annually. CenturyLink and Savvis will have a robust national network with over 200 route miles of fiber, with a global presence across North America, and Europe and Asia. In addition, this transaction will triple CenturyLink's data centers from 16 to 48, and offer significantly enhanced product depth for our customers. Coupling Savvis' leading managed IT services and enterprise grade cloud services with CenturyLink's much larger telecommunications and networking operations and our hosting assets will allow us to gain scale in a rapidly growing industry faster than we could do organically. Also by leveraging CenturyLink's existing relationships with our many business customers, we'll be able to provide Savvis' IT consulting and cloud products to a greatly expanded customer base. With that, I'll turn it over to Stewart for some comments on our financial results. Stu? R. Ewing: Thank you, Glen. During the next few minutes, I'll review some highlights of our first quarter 2011 operating results and will conclude my comments with a discussion of the 2011 guidance provided in our earnings release issued earlier today, and provide comments on our capital structure. Turning to Slide 13, I want to begin by reviewing with you a couple of special items that occurred during the first quarter, and then I will discuss first quarter normalized results. First, we incurred approximately $29.6 million of pretax expenses or about $0.06 per share related to integration and severance costs associated with the Embarq integration. Second, we incurred about $5.9 million in pretax transactions and integration cost positions [ph]. In the aggregate, these items represent the $0.07 per share difference in normalized diluted earnings per share of $0.76 and GAAP diluted earnings per share of $0.69. Now turning to Slide 14. This slide reflects CenturyLink's results for first quarter 2011 compared to first quarter 2010, excluding special items for both periods as outlined in our financial schedules. Please note that the information on this slide excludes Qwest's results since the merger closed effective April 1. I'll briefly discuss Qwest first quarter results a little later in my comments. For first quarter 2011, operating revenues declined $104.7 million to $1.7 billion from $1.8 billion in first quarter a year ago. The decline in revenue resulted primarily due to a 7.5% decline in access lines and the anticipated decline in Universal Service Fund revenue. This was partially offset by higher special access revenue due to demand from wireless carriers and the increase in high-speed Internet customers. Cash operating expenses decreased $37 million from $865 million in first quarter 2010 to $828 million in first quarter 2011, primarily due to lower transport costs due to the migration of legacy Embarq long distance traffic to our internal IT network and lower personnel costs. These decreases were partially offset by higher costs associated with the expansion of CenturyLink's Prism TV service into additional markets, as Glen commented on earlier. Depreciation and amortization expense increased from $353 million in first quarter of 2010 to $369 million in first quarter of 2011, primarily due to planned additions and final valuation adjustments for the Embarq acquisition. Net income attributed to CenturyLink for the quarter was $233 million compared to $279 million in first quarter a year ago. And diluted earnings per share were $0.76 in first quarter 2011 and $0.93 in first quarter 2010. We achieved earnings above the end of our -- the top of our guidance range due to lower than expected operating expenses. The year-over-year decrease in net income and earnings per share is due to anticipated revenue declines we've discussed with you, and the challenge of reducing costs in the near term due to the Qwest transaction and the expansion of IPTV service into additional markets. Completing the successful integration of Embarq and planning for and achieving successful integration of Qwest are 2 of our primary focus areas. While the merging integrations and these product expansions impact our operating costs in the near term, we're confident that these represent investments in the future success and growth of CenturyLink. Finally, our free cash flow decreased 16.6% from $633 million in first quarter 2010 to $528 million in first quarter 2011. Free cash flow declined in first quarter 2011 primarily due to a $44 million increase in capital expenditures and lower operating cash flow. Our free cash flow calculation is defined as net income excluding special items, plus income tax expense, depreciation and amortization, less cash paid for income taxes and capital expenditures. We revised our definition of free cash flow due to the impact on cash paid income taxes, of bonus depreciation and the impact of Qwest NOLs going forward. On Slide 15, we highlight Qwest's results for the year. Qwest generated revenue of $2.85 billion, a 4% decline from the same quarter a year ago. Strategic services revenues grew primarily due to an increase in Qwest iQ Networking and data transport services, as well as higher broadband revenues driven by subscriber growth and an improving mix of higher speed broadband services. These increases were more than offset by a decline in legacy service revenue associated with line losses, along with lower data integration revenues. Operating expenses, including both cash and noncash expenses but excluding special items, declined nearly 6% to $2.25 billion due to lower personnel and selling costs. Operating income, excluding special items, grew 2.4% to $593 million. Access lines declined 10.7% from the year ago period. Meanwhile, DSL growth remained healthy at nearly 4% growth year-over-year. Now turning to Slide 16. Our 2011 guidance excludes the effects of nonrecurring items, integration expenses associated with the Embarq acquisition, transaction and integration expenses associated with the Qwest acquisition, any changes in operating or capital plans, any changes in regulation and any future mergers, acquisitions, divestitures or similar business transactions. Please note, 2011 full-year guidance, which is the first column on the slide, reflects only CenturyLink results for first quarter 2011 and then combined CenturyLink and Qwest results for the remainder of the year. For full-year 2011, CenturyLink expects operating revenues to be $14.9 billion to $15.1 billion, and EPS to range from $2.55 to $2.65 and capital expenditures to be $2.2 billion to $2.3 billion. For second quarter 2011, CenturyLink expects total revenues of $4.4 billion to $4.43 billion and diluted earnings per share of $0.63 to $0.67. The sequential decline in diluted earnings per share expected in second quarter is due primarily to a decline in voice and access revenue, partially offset by an increase in high-speed Internet revenue and a seasonal increase in outside plant maintenance. Please note on this slide that the second column entitled pro forma 2011, provides guidance as if the Qwest merger was effective January 1, 2011 and the company operated on a combined basis for the full-year of 2011. We continue to expect that our dividend payout ratio in 2011 will be slightly less than 50% of free cash flow. On Slide 17, in the earnings release today, we included estimated impacts that the application of business combination accounting rules are expected to have on the combined company's financial results for second quarter 2011 and full-year 2011. All of these items are noncash items. Please see the earnings release and the related 10-Q filing for further information. Additionally, we attached a pro forma first quarter 2011 income statement which reflects pro forma first quarter results as if the Qwest acquisition closed January 1, 2011. To simplify our guidance, and when building your first -- your models for 2011, you may want to use this as a base for projecting your pro forma results for 2011. The midpoint of our second quarter diluted earnings per share guidance is $0.65. If you assume that we maintain about that level of earnings in each of the remaining quarters of 2011 and add first quarter pro forma diluted earnings per share of $0.70, you get to $2.65 or the top of our pro forma diluted EPS guidance for the year. In essence, we are expecting to be able to offset revenue declines, which by the way we expect to continue to improve during the year, and the cost of our IPTV rollout with the realization of synergies related to Embarq and the Qwest acquisition. Regarding the capital structure and use of free cash flow, as we have stated, the board will consider use of free cash flow next year as we more fully realize expected merger synergies and see further progress with the merging integration of Qwest. We have also indicated that maintaining an investment grade credit metrics is important. Accordingly, we expect that during 2011 and 2012 we will reduce debt by $1.5 billion to $2 billion from the year-end 2010 pro forma level. This concludes our prepared remarks for the day. At this time, I'll ask the operator to provide further instructions for the question-and-answer portion of our call.

[Operator Instructions] Our first question comes from David Barden. [Bank of America Merrill Lynch]

So I think this is a good venue, maybe an opportunity to hash something out. Looking back at first quarter, in January, the market was looking for a $670 million of EBITDA. After the February print, you guys guided people down on conservative margin expectations and the guidance fell to $625 million. And then you guys just posted up a $668 million EBITDA number, basically -- exactly where everyone thought you would be. But in the meantime, because you guided everyone down, the stock price is down 10%. And now we're looking at the Qwest merger, you guys have a very good print. But your stock is underperforming today and it's because I think people are confused as to whether -- we're trying to be conservative or things are really getting worse at the combined entity. Because if you take your CenturyLink stand-alone guidance for revenue, for instance, and add the Qwest revenue from first quarter, it implies, adjusting for the eliminations, that the Qwest revenue growth rate will go from a decline of 4% to a decline of over 6% in the rest of the year. Despite, Stewart, which I think you are saying, was that revenue growth is actually going to get better. So I think people are struggling to understand, are we being conservative and we should really just assume that this is the rock bottom that we're going to do for the year? Or do we really need to be concerned about what the business is doing, because the number seem to suggest it's is not going to get better for the rest of the year? R. Ewing: Yes, David. First, let me address the revenue decline. On a pro forma basis, for 2011, we expect to end the year, on a combined basis, at about a 3% decline compared with 2010. So it could be that some of the elimination entries and some of the acquisition-related adjustments are making it look that way to you. I'm not sure, I'll have to go back and look at that further. Maybe we can talk later. But just -- all in all, if you take 2010 and 2011, we would expect to end the year -- full-year at about a 3% decline compared with 2010. In terms of the first quarter guidance that we gave versus where we ended up, and I guess versus the guidance that we're giving for second quarter, basically our expenses were lower than we thought they would be in first quarter, primarily due to the -- our bad debt expense was down somewhat, about a little less than $6 million. We spent a little bit less rolling out IPTV, primarily related to marketing because we had a good funnel from the standpoint of installations that we really didn't want to -- we didn't really need to push it from a marketing standpoint, so we didn't spend some marketing dollars that we had anticipated spending. I guess the pension reduction we didn't really have built into our guidance, that we basically froze the pension for non-bargaining unit employees. And we did that -- I guess, our board approved it actually after the first quarter earnings call. And then just our outside plant maintenance expenses, which typically in the first quarter are lower just from a seasonal standpoint, ended up being lower than we had estimated. And then some of the -- our maintenance contracts in IT. I guess we got a little bit more synergy from the Embarq acquisition that we really didn't expect to get in the first quarter. So that kind of really rounds out first quarter in terms of why we ended up better than we thought we would end up from an expense standpoint. If you look at second quarter, again, it's going to be basically the seasonal maintenance associated with our outside plant activity that we normally experience. And then we do expect to pick up some of the marketing expenses that we didn't incur in the first quarter. And again, expect -- we think our bad debt expense was actually a little bit unusually lower in the first quarter. And then we expect to continue to drive IPTV and expect that to, as we discussed on last quarter's call, expect that to drive higher expenses more or less throughout the year. From a revenue standpoint, always, first quarter from -- compared with fourth quarter, we had the revenue step down associated with USF. We had that step down in first quarter this year. We expect that to be relatively flat for the remainder of the year, so that will account for some of the improvement in the revenue decline, and then we expect IPTV as well to show some positive results throughout the remainder of the year in terms of increase in revenue to offset some of the declines that we'll otherwise see.

Our next question comes from Batya Levi. [UBS] Batya Levi - UBS Investment Bank: I do want to follow up on the revenue guidance question. If we look at the pro forma revenue decline in the first quarter, it's about 4.7%. The guidance for the year suggests that you're going to basically be at about 4% to 5% decline as a standalone CenturyLink or pro forma company. And given the positive commentary about USF being flat, IPTV should improve. I think you had mentioned before that there is some opportunity to gain share back in Qwest territory from the SMB business. Would you expect this revenue decline to decelerate from 1Q on? And related to that, I wanted to just follow up on the CapEx side. If you could provide a little more granularity on how the CapEx has been split in terms of fiber-to-the-cell opportunity versus IPTV, and what -- about how many markets do you expect to launch on IPTV this year? R. Ewing: Okay. Batya, just with the -- I'll start with the CapEx and then Glen can talk about IPTV rollouts, and then we'll come back to revenue. Basically at legacy CenturyLink, because of increased demand from the wireless carriers for fiber-to-the-cell, we would expect to spend about $180 million or so in 2011 for fiber-to-the-cell projects. At legacy Qwest, as you know, there -- have a project with respect to increase in high-speed Internet speeds with their fiber-to-the-node project. If you -- and basically, they use some of that build to get to the fiber-to-the-tower as well. So when you look at the combined fiber-to-the-node and fiber-to-the-tower build out that legacy Qwest would expect, they would expect to spend about $300 million in 2011. So of the total $2.6 billion, $2.7 billion capital budget, about $0.5 billion of it is due to a combination of fiber-to-the-node and fiber-to-the-tower in 2011.

And Batya, regarding IPTV rollout, we do not expect any additional rollouts in the CenturyLink markets. We have all the 8 markets now and we'll be working to accelerate the growth there, the implementation there, working through that. We'll be evaluating the Qwest markets in the coming months. We have no -- not made any decisions about any rollouts of additional markets there, but we are -- we do think there could be some opportunity there. We're in the process and working through the cost of the plant requirements, plant addition costs, and shortening of loops of what we require there. And we'll be making those decisions around mid-year as far as any additional rollouts for IPTV and in any of those markets. R. Ewing: Yes, and on the revenue guidance, and -- I mean, I apologize to all of you for all of this being so complicated. But if you look at some of the eliminations that we have associated with the purchase accounting, so we have affiliate revenue where we were a customer of Qwest and they were a customer of us in some cases, of about $76 million related to 2010 that in effect needs to be pulled out of 2010 revenue when you're putting the 2 of us together. There's also $216 million of installation revenue on Qwest that basically is deferred revenue on the balance sheet, is a deferred liability basically. It gets amortized to revenue over the expected lives of the customer. With the purchase accounting adjustments, basically that gets a fair value of 0, so that revenue basically never gets recognized even though -- and the cash was previously received on it. So basically, there's about $280 million of revenue that you need to back out of 2010 revenue if you just take legacy CenturyTel or Link and legacy Qwest and add it together. So basically, that's about $18.5 billion of revenue for 2010. And they're comparable adjustments. I think all of that is in the 8-K that we filed and in the pro formas. They're comparable adjustments that would need to be pulled out of 2011, basically. If you're just trying to project out legacy CenturyLink and legacy Qwest and add them together, the comparable amount that you would pull out of 2011 is about $250 million or so. I think if you make those adjustments, you'll get down to about the 3% or so decline that we expect. So I think what's happening there, you may be comparing -- maybe taking 2010, adding CenturyLink and Qwest together without making those negative adjustments that need to be applied to 2010, and then comparing that to the guidance that we're making and it's looking like a 4% to 5% decline as opposed to the 3% decline that we see. Batya Levi - UBS Investment Bank: If I could just follow-up on that. I guess your guidance for CenturyLink alone was just a 2% to 3% decline by year-end. Now, if you make all these adjustments and add Qwest to that, what's your expectation for the exit of the year? For revenue decline. R. Ewing: Yes, you're right. Standalone CenturyLink was about 2% to 3% decline when we get fourth to fourth. If you look at -- basically on a pro forma basis, it's about -- actually, about 3% fourth to fourth decline. So I guess if you're looking at 2011, it's closer to a 4% decline, on a pro forma basis for full-year. But when you get to fourth quarter and compare it fourth to fourth, basically we'll be down to about a 3% decline fourth quarter to fourth quarter.

Our next question comes from Mike McCormack. [Nomura Securities] Michael McCormack - Nomura Securities Co. Ltd.: Maybe just a couple of things, legacy and Qwest, and I'm not sure how much you're willing to share here. But, there was a pretty strong recovery in business revenue. Can you just breakdown for us, Stewart, if you can, the growth rates of Wholesale and Business? And then also on Qwest, the consumer line loss and your strategy there to get that improved? And then just lastly, maybe for Glen, your thoughts on any other holes in your portfolio that you think over the next, sort of, whatever, 3 to 5 year period might be interesting to fill? R. Ewing: Mike, yes. So, Mike, if you -- and we'll file a 10-Q probably tomorrow on QCII and Qwest Corporation so basically, you'll get full first quarter information on Qwest once that gets filed tomorrow. Basically on BMG, recurring revenue was flat sequentially and down about 2% year-over-year on slower strategic revenue growth of about 5.2% year-over-year versus 8.3% year-over-year in the first quarter of 2010. The total segment revenue declined 3.1% year-over-year due to lower data integration revenue. If I recall, I think the data integration revenue was about $47 million lower than it was previously. So strategic revenue on BMG improved to 45.6% of total revenue from about 42% in the first quarter a year ago. If you look at Wholesale, the total segment revenue was flat sequentially on substantially improved legacy revenue results and down about 5% year-to-year. If I recall, they had pretty good improvement in, basically, special access. Again, just increased demand that we continue to see from the wireless carriers with both fiber-to-the-cell and additionally turning up additional copper services to the cell where we only have copper in the towers.

Mike, regarding the holes in the portfolio product and services. Right now, we feel like we're in very good condition from a service -- product standpoint. We've got, of course, the high-speed Internet including interactive services, we've got the video product, ethernet and MPLS. We've got CLink operations with a good strong product base there. We've got -- we're rolling out voice over IP in the markets now, we're expanding that footprint. That's an area we want to expand, but we're doing that internally and expect to do that expansion going forward. We've got the hosting business, cloud computing, infrastructure-as-a-service, and platform-as-a-service. Those -- all those services are there. The only obvious -- you might say, is wireless. But we've got a really good relationship with the Verizon deal we have now, that we -- what Qwest has and we think we enhanced that agreement and we feel good about that. So right now, we're going to be really focused on integrating Qwest and getting Savvis integrated and rolling out new products and services there. No major needs for the time being that we see as far as product gaps. R. Ewing: And Mike, on Consumer line loss -- well, I guess on total line loss, consumer line loss specifically, Qwest was down about 12.2% and about 2.9% sequentially. If you look at total line loss for Qwest quarter-to-quarter, first to first, they were down about 10.7%. Qwest and CenturyLink have different methodologies for defining access lines. If you -- because of the good quarter that Qwest had and in high-speed Internet customer additions, basically legacy CenturyLink, we count standalone high-speed Internet customers as an access line, because it's a customer connection, really. Additionally -- and Qwest does not count that historically. We do not count Eunice. Qwest does count Eunice and Qwest has continued to have a decline in Eunice over the years. So basically, if you put first quarter to Qwest on the same methodology that legacy CenturyLink uses, their access line loss rate, the way we would define it, would've been about 7.5%, which was about the same as the access line loss rate at legacy CenturyLink at quarter-to-quarter.

Our next question comes from Phil Cusack. Unknown Analyst -: So maybe 2 quick things. One is can you talk about how you're going to think about revenue synergies going forward, both on the Qwest side where you really never broke them out? But now that it's closed, maybe you start talking about them, and then on Savvis going forward. Maybe that first? R. Ewing: Phil, the Savvis acquisition is about growth. We've talked about synergies there, but we think the real opportunity is growing revenues over time. We have not been willing to put out, and we're not going to put out, a revenue synergy projection, but that is what this is about really. It's about revenue growth and cash flow growth over time. And we think it's a -- it is the fastest growing sector with the hosting managed services cloud area that -- in our sector right now. And we'll be one of the top players with global footprint -- global presence in this sector. So we feel really good about the opportunities there. And Qwest, bringing the companies together, we think we will be able to regain market share in a lot of these areas and have a more robust product portfolio as well. So the opportunity is there, we're just not willing to quantify it at this time. R. Ewing: And I think that's really, really tough to track. And I think a good place for you to look will be the revenue guidance that we give. Because eventually, the synergies that we expect or the improvements that we expect, more or less revenue, will be built into our guidance and we'll update that quarter-to-quarter. But it's hard to really break out what is a synergy from a revenue standpoint versus what's business as usual or just hiring a great sales person. Unknown Analyst -: So does it make sense for us to not look for you to sort of break out revenue synergies over time? R. Ewing: Yes, I think that's right. I would look at it really as part of the revenue guidance that we give. And if we -- like we've given guidance for the full-year now. If we take up our revenue guidance somewhat during 2011, I think you'll be able to assume that some of that's because the local operating model is working and because we're basically achieving some of the objectives that we had from a standpoint of taking market share back. Unknown Analyst -: That makes sense. And then on the tax line, can you talk about taxes over the next, say, 5 years? Between bonus depreciation and Qwest NOLs, how do you think that affects both the GAAP and the cash tax lines? R. Ewing: So the GAAP taxes, at least this year, we expect our effective tax rate to be about 38.5%. With respect to cash taxes, both -- I mean, we're using bonus depreciation this year and essentially, I mean even on a stand-alone basis, legacy CenturyLink would not have had -- would have had only a very small amount of cash taxes. Legacy Qwest, of course, brings with it the NOL. They're taking bonus depreciation this year as well, so as a result we'll not use much, if any, of the NOL that they have available. What they don't use, we'll be able to use that next year. We don't really expect to pay cash taxes at this point until sometime around the end of 2014 and possibly out into 2015. Unknown Analyst -: And on the -- as you book the -- as you don't pay the cash taxes from the NOLs, is it still booked at probably a 38% rate over the next 5 years for GAAP? R. Ewing: Yes, that's probably a pretty good assumption to use. I mean, that's -- when we've looked at the effective rate on a pro forma basis, that's kind of what we come up with for 2011. So I wouldn't expect that to change a whole lot in the future other than changes in state income tax rates and changes in other items. Unknown Analyst -: Is there a nominal amount of state income tax that we should assume every year or is that pretty low as well? R. Ewing: Yes, there is a nominal amount of state income taxes that we pay, plus we'll pay some nominal amount of alternative minimum tax possibly, as well.

Our next question comes from Simon Flannery. [Morgan Stanley] Simon Flannery - Morgan Stanley: I know it's only a couple of weeks or just a month since you've closed the Qwest transaction, but perhaps you could just compare and contrast the first month or so with Qwest versus Embarq. How are you differing in your approach? How are you finding the systems, the people and so forth versus your expectations going in? And you gave some guidance on exiting 2011 at a $200 million synergy run rate. Perhaps you could talk about how that scales during 2012. Are we going to see that -- another $200 million next year as well? Or higher or lower?

And now I'll start and ask Karen to really -- but at a high level, it'll take us a quarter to really get things moving and changing the way the call centers looking to sell products and services to get our local operating model really in place. So it'll be just like it was at Embarq. But we're getting a lot of -- I think we're creating a lot of excitement in the marketplace with our local market model. And we're seeing -- I think we'll see a serious focus on customers and on what's needed in the local market. We try to rework to regain market share, but I'll let Karen to talk about the details here a moment.

So, been out quite a bit and I would -- at the same, I would use -- we've been incredibly encouraged from the techs and all the front line employees. They're excited. We have all the regions in place. We have all the general managers in their markets. They've been out, they've been doing a lot of roundtable meetings with customers. So we're learning a lot and we're kind of aligning that with our current go-to-market plan to continue to refine those. As Glen said, we have some fairly significant changes in our channels, how we go to market with our channels, how we comp our channels. So from a frontline leadership perspective, there's some shifting going on that's going to take us a quarter to work through in bringing them to the way we do business. But overall, very encouraged as we've done our assessment, we have our market plans for each market done. We think the revenue that's in the revenue guidance is very doable. We're excited about taking market share back, getting more local, competing with CLEX [ph] and the cable companies have really taken a lot of market from Qwest. Simon Flannery - Morgan Stanley: And on the 2012? R. Ewing: Yes, Simon, at this point, we're not really prepared to give guidance for 2012. In part, that's due to just the fact that we're still working through the systems to determine what conversions we'll do and that will impact synergies that we would expect to get in 2012.

Our next question comes from Robert Schiffman [ph]. Unknown Analyst -: I think your comments on debt pay down over the next 18 months is clearly constructive. But just to give us a little bit of a better sense of, sort of, size and timing and placing of financing would really help out. Historically, you've been pretty clear that you want to pay down debt, it's apparent in refi-ed debt at the opco [operating company], at Qwest Corp. level. The vast majority of the debt that's coming due over the next few years is that not all of it is at Qwest Corp. But does that imply that if you're going to be coming to market, we're unlikely to see a significant amount of DTL [ph] paper shoot and mostly Qwest Corp. paper shoot? And if not, why not? R. Ewing: Robert, we haven't really made final decisions in terms of what debt we'll pay out and refinance. But I think, if you look back to the end of 2010, we basically, between the credit facility and the maturity that Qwest had through the 1st of April or 2nd of April or so, we paid off about $500 million of debt during the first quarter. We'll have the need, the financing need associated with the closing of the Savvis transaction where we'll need about -- between $2 billion and $2.4 billion of cash for that. The timing of that will be dependent upon when that acquisition would close, which will be some time in the last half of the year. And then also, we'll do refinancing at the Qwest Corp. level and we'll likely do some of that this year as well. But in terms of the amounts, we haven't really settled in on that at this point. Unknown Analyst -: You understand where I'm getting at, though, is that if you have mostly Qwest Corp. refinancing to do, you wouldn't think that you'd want to term out the bridge facility beyond those 2 years. Because how else do you pay down debt if you do? R. Ewing: Yes, well, we can issue -- I mean some of it can be associated with the Savvis transaction in terms of re-payment of some of that. There are additional maturities as I recall that either Qwest has or Qwest Corp. has or Qwest QCIS [ph] that are actually callable at par, at sometime in 2012. So I think we'll have some opportunities to pay down debt at the parent company level and continue to refinance the Qwest Corp. debt or pay off some of it as it becomes due. Unknown Analyst -: All right just one last question. You've done a great job in the past integrating all M&A and I think just being consistent in terms of your leverage ratios. But right now with one of the agencies, the BB and Moody's recently changing their low BBB outlook to negative. Would you be willing or are you considering trying to make a bigger commitment to bondholders like potentially including coupons for them? R. Ewing: No, not at this time. I mean, we indicated that we expect to pay off between $1.5 billion and $2 billion of debt in 2011 and 2012. I mean, we're hopeful that, that will enable us with good performance in the base business to be able to keep the credit ratings as they are.

Our final question for today comes from Kevin Smithen. [Macquarie Research] Kevin Smithen - Macquarie Research: Just as a follow-up to that. You talked about $1.5 billion to $2 billion in debt reduction in 2011 and 2012. Can you just walk us through some of the -- and dividend payout ratio less than 50% of free cash flow. Sort of implying cash flow higher than your implied earnings guidance. Can you talk about some of the -- maybe some noncash adjustments on top of the pro forma adjustments you laid out in the press release that could make free cash flow significantly higher than your guided earnings? R. Ewing: Yes. So basically, it's the cash taxes that we'll pay versus book taxes. Kevin Smithen - Macquarie Research: Yes. Anything else? R. Ewing: As well as bonus depreciation in 2011 and really, because of the NOLs that Qwest has that we'll be able to use in the future, we don't really expect significant cash taxes between now and the end of 2014. So the definition that we're using for free cash flow basically is net income plus depreciation and amortization, plus book taxes, minus our cash taxes which again, we would expect to be fairly small, minus capital expenditures. And also, with the -- and from the second quarter on after closing the Qwest transaction, we'll get a noncash benefit to interest expense of about $75 million to $80 million a quarter, at least for the remainder of 2011. And we expect to add that back in our free cash flow calculation as well. So that in effect, we'll recognize that that's a noncash item. But basically, the biggest item are really the fact that we're not paying cash taxes other than a minimal amount and that's how the free cash flow gets above what you would typically expect to see by just taking net income and adding depreciation and amortization, or for that matter, just taking cash flow from operations altogether. Kevin Smithen - Macquarie Research: I mean, you can kind of back in to a 15%-plus free cash flow yield. I guess the question is, why don't you give annual free cash flow per share guidance as opposed to choosing to give EPS guidance, which includes a lot of noncash charges and maybe understating your profitability? R. Ewing: That's something we're certainly going to consider for the second quarter forward.

Thank you. This concludes our question and answer session for today. I would now like to hand the conference back over to Mr. Glen Post for any closing remarks.

Thank you. In closing, CenturyLink did achieve solid financial results for the first quarter, with an improving top line revenue trend and strong cash flows. We're also pleased to close the Qwest transaction effective April 1 and look forward to making solid progress in integrating the Qwest operations in the months ahead. Additionally, the Savvis merger agreement announced last week affords us an excellent path with integration of 16 legacy Qwest data centers, and significantly accelerates CenturyLink's growth opportunities in the fast growing Managed Hosting and Cloud Services business. While also it further strengthens our revenue mix. The last few years have truly been transformational for CenturyLink and we believe we are well positioned to provide customers the products and services they need, as well as continue to create long-term shareholder value in the months and years ahead. We appreciate your participation in our call today and look forward to speaking with you again 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.