Embarq’s outlook improves

Embarq raised its revenue and earnings expectations for the year this week as it saw increased market penetration.

Whereas the company previously anticipated 2007 telecom revenue no higher than $5.9 billion, it now expects about $6.36 billion. And it raised earnings expectations for the year from $4.41 to $4.45 per share.

Second-quarter telecom revenue was down less than 1% from a year earlier, as growth in wireless and high-speed Internet revenue offset declines in traditional voice revenue.

The company lost 146,000 access lines in the second quarter, but that number was 5000 lower than the number it reported a year ago. In the consumer market, the company lost 127,000 lines in the quarter—8000 fewer than it reported a year ago.

To address what the company called the primary cause of consumer churn—customers moving—Embarq has brokered agreements with six “medium-sized” CLECS that allow customers to transfer their service to their new address, even if it is outside Embarq’s territory. That service was launched at the end of the second quarter.

Dan Hesse, CEO of Embarq, declined to name the specific carriers, adding, “We all agreed we wouldn’t go public with that.”

Part of the reason for Embarq’s improved outlook was a slower-than-expected spread of cable telephony, which is available to 65% of households in Embarq’s customer territory. A year ago, it was available to 50%, Embarq said.

However, cable companies are becoming more competitive in the market for high-speed Internet service, Hesse said. “Cable companies for a long time had a one-size-fits-all approach for their high-speed Internet offer. Now they’re offering lower speeds—sub-1.5 Mb/s and 1.5 Mb/s—at lower price points. They’re seeing a need to bring the price point down and become more competitive.”

Embarq’s high-speed access service is now available over 77% of its access lines. During the second quarter, the company’s DSL subscriber base grew by 52,000 to 1.15 million.