Good day, ladies and gentlemen, and welcome to CenturyLink's Fourth 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. Sir, you may begin.

Thank you, Saeed. Good afternoon, everyone, and welcome to our call today to discuss CenturyLink's fourth quarter 2011 results released earlier this afternoon. The slide presentation we will be reviewing during the prepared remarks portion of today's call is available on our Investor Relations section of our corporate website at ir.centurylink.com. At the conclusion of our prepared remarks today, we will open the call for Q&A. On Slide 2, you'll find our Safe Harbor language. We will be making certain forward-looking statements today, particularly as they pertain to guidance for 2012, the integration of Qwest and Savvis and other outlooks on our business. We ask that you review our disclosure found on this slide, 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 our forward-looking statements. We ask that you also note that our earnings release issued earlier this afternoon and the slide presentation and remarks made during this call contain certain non-GAAP financial measures. A reconciliation between the non-GAAP financial measures and the GAAP financial measures are available in our earnings release and on our website at www.centurylink.com. Turning to Slide 3. Your host for today's call is Glen Post, Chief Executive Officer and President of CenturyLink. Joining Glen today will be Stewart Ewing, CenturyLink's Chief Financial Officer. And also available during the question-and-answer period of today's call will be Karen Puckett, CenturyLink's Chief Operating Officer and leader of our Regional Markets Group; Chris Ancell, who's President of our Business Markets Group; Bill Cheek, President of our Wholesale Markets Group; and Jim Ousley, CEO of our Savvis Group. Our call today will be available for telephone replay through February 22, 2012, and accessible by webcast through March 8, 2012. Anyone listening to a taped or webcast replay or reading a written transcript of this call should note that all information presented is current only as of February 15, 2012, and should be considered valid only as of this date, regardless of the date heard or reviewed. As we move to Slide 4, I'll now turn the call over to your host today, Glen Post. Glen?

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today as we discuss CenturyLink's fourth quarter 2011 performance and share our strategic areas of focus heading into the months ahead. Our results were strong. During the fourth quarter, we continue to invest in key areas of growth, meet our integration objectives and build positive momentum in a number of areas across our business despite a challenging economy and a very competitive business environment. Now turning to Slide 5. I want to highlight a number of accomplishments we achieved during 2011. First, we completed the acquisitions of Qwest and Savvis, adding strategic high-quality asset to CenturyLink, which further diversified our revenue mix, broadened our portfolio of assets that strengthen CenturyLink's position as a leading communications company. We've also added a global aspect to our business through these transactions. Second, during the fourth quarter, we achieved operating revenues above the top end of our fourth quarter revenue guidance. And for full year 2011, we successfully lowered the rate of revenue decline to 3.8% from approximately 5.6% for pro forma full year 2010. We also successfully completed integration of Embarq and made solid progress with the integration of Qwest and Savvis while reaching our full operating expense synergy target for Embarq and exceeding our 2011 operating expense synergy target for Qwest. From an operating metrics standpoint, the rate of access line loss in our business continue to decline in 2011, improving from 8% at year-end 2010 to 6.6% at the end of 2011. Additionally, we experienced solid broadband subscriber growth of nearly 240,000 subscribers during 2011, a 4.5% decline -- I'm sorry, improvement. We completed over 1,500 fiber-to-the-tower builds during 2011 and enabled Ethernet services to more than 430,000 exchanges since April 1, 2011. Lastly, we expanded our Prism TV…

Thank you, Glen. I'll spend the next few minutes reviewing some of the financial highlights for the fourth quarter, and then I'll provide an overview of the guidance that we included in our earnings release issued earlier this afternoon. Now turning to Slide 10. First, in order to provide more relevant comparisons, I'll be reviewing the financial results on a pro forma basis as if Qwest and Savvis were fully included in the results for all periods. As you can see, we generated strong operating revenues and solid cash flows during the fourth quarter. For fourth quarter 2011, operating revenues were $4.653 billion on a consolidated basis, slightly above the top end of our guidance for the quarter, representing a 3.2% decline from pro forma fourth quarter 2010 operating revenues and a sequential increase of 0.4% compared to the prior quarter. Strategic revenues grew 4.7% to $2 billion, while our legacy revenues for fourth quarter were $2.2 billion, a decrease of 9.5% from pro forma fourth quarter a year ago. On a full year basis, operating revenues declined 3.8%, which was a little better than an anticipated 4% year-over-year decline and a nice improvement over the approximately 5.6% decline in pro forma operating revenues for 2010. You will recall when we reported earnings last quarter, we outlined and spoke about adjusted diluted earnings per share, similar to what other companies in our industry have done following a major acquisition. Adjusted diluted EPS excludes acquisition integration costs and any other special items that may occur during a given quarter. It also excludes the noncash impact of the amortization of intangibles and the noncash impact to interest expense of the assignment of fair value to debt outstanding from the application of business combination accounting rules to recent acquisitions. Adjusted diluted earnings per…

[Operator Instructions] The first question comes from Mike McCormack from Nomura Securities.

Just thinking about the EBITDA trend, Stewart, throughout the year, we saw margin pressure sort of building throughout the year. With the 2012 expectation, it looks like there's something to recover in Q1 and stayed pretty strong throughout the year. Just trying to get the puts and takes there. And I noticed also BMG margins took a pretty strong hit in the quarter. Just trying to figure out if that's a seasonal impact or whether we'd see continued margin pressures there?

Mike, for BMG, the CPE was a portion of the margin hit that they took in the fourth quarter. And in terms of 2012, yes, we would anticipate -- we see some normal seasonal improvement in the first quarter. I mean there'll be some continued pressure during the year, but we hope to relieve some of that pressure with the continued synergy achievement that we expect during the year, as well as our business as usual expense cuts.

Our next question comes from Batya Levi from UBS.

One question on the EBITDA, reported EBITDA for the fourth quarter. I think you missed your guidance a little bit. Can you go through the drivers for that? And if that number also has impacts on the noncash pension and OPEB cost? And how should we think about that pension cost? How much of that is included in the EBITDA guidance for 2012?

Yes, so Batya, the reason we missed the EBITDA guidance slightly in the fourth quarter was due to the additional expenses in the fourth quarter. Again, about $40 million of that related to pensions and benefits, $30 million of which was really noncash and is really included as a cash expense in EBITDA, the way we handle it. But that $30 million related to lowering of the discount rate and changing in some of the other actuarial assumptions related to primarily long-term disability. The other $10 million really related to the medical expenses being about $10 million over what we had expected for the quarter. So that was about $40 million. Additionally, we had some network expense, incremental network expense in the quarter of probably $25 million, $25 million to $30 million or so. Some of that was driven by the additions that we had with respect to high-speed Internet, our IPTV. That growth drove some incremental expenses, as well as completing the connections, the Ethernet connections to fiber-to-the-tower. So that really accounts for most of the other expense increases during the quarter.

And for 2012 guidance, how much do you think pension and OPEB is going to hit EBITDA?

So we'll have about -- there's about $50 million or so. When you combine pension and OPEB, that hits expense as a cash expense in our EBITDA number.

Our next question comes from Frank Louthan from Raymond James. Frank G. Louthan - Raymond James & Associates, Inc., Research Division: Can you walk us through sort of the trends of the Savvis business? It looks a little bit lower than we would have thought in the quarter. When did the bookings turn into sales and actually start hitting the books? And then what's the status with the Qwest data centers that were sort of underutilized? And at what point should we start to see that either be lumped into that Savvis business or start to see that start to grow?

Frank, this is Glen. I'll start, we'll then ask Jim Ousley here to really go into a little more detail. We had low bookings in the third quarter. Of course we knew we had some federal stuff coming in -- flowed into the fourth quarter there and we had some higher churn as well in the third quarter. All that caused the -- some delay in the revenues. With the larger deals that we're working on, there is a larger time frame required for it to complete those. But overall, we think we'll see that pick up in the first quarter and we're going to spend some revenue in the second quarter. And we're seeing in 90 days or so lag on the revenues. But Jim, do you?

Yes, this is Jim Ousley. Third quarter obviously was when the transaction took place, so we had a lull in bookings in the third quarter due to the transaction. Customers waiting to see if there was going to be an impact, what was going to transpire, employees of course are also, so third quarter bookings definitely affected the fourth quarter. The very positive aspect is once that was all done, we communicated with our customers. We had the strongest fourth quarter bookings we've had in several years. So that fourth quarter bookings will reflect in revenues, starting the end of the first quarter and into the second quarter. So we see the recovery out of the third quarter lull as very strong. Frank G. Louthan - Raymond James & Associates, Inc., Research Division: Okay, great. And maybe, Stewart, can you comment on use of cash? I'm seeing you're still working on some of the debt repayment commitments you've made and then thoughts on use of cash after that?

Yes. So Frank, basically, we'll -- it'll take most of the year to really complete the $1.5 billion to $2 billion pay down of debt commitment that we made to the rating agencies and really, frankly, take most of the free cash flow that we have this year that won't be used for dividends. So yes, I would expect that towards the end of the year, as we see how we have performed in 2012 and have our outlook pulled together for 2013, we'll talk with the board about use of cash going forward.

Our next question comes from Simon Flannery from Morgan Stanley.

You had strong broadband results, and you talked a little bit about the local market. Is this something that you think there's an opportunity to continue into 2012? Perhaps if you could just talk around some of the things you're doing there and the results you're getting? Also, in terms of the capital spending budget, I think the capital spending is coming down a little bit in terms of intensity. Just talk about how much of this is related to things like IPTV and sort of growth initiatives, how much is sort of maintenance.

Simon, Karen Puckett. In terms of the broadband growth, we did have a good quarter. Key enablers, really the local market, holding the general manager accountable for specific and getting the local team involved. Secondly, our go-to-market continues to ramp the changes we've made. Marketing to noncustomers, more DM, the 5-year Price-Lock, as well as Bundle Your Way is playing very well for us. And then our channels and our call center channels we've improved pretty significantly ourselves per 100. The other benefit we're really ramping on some retention programs that we've been working through. So all of that is equated to this overall significant improvement in broadband, especially in the Qwest market.

Great. And so something that is sustainable into '12?

We're optimistic about 2012. And typically, first quarter, we had such a strong fourth quarter, first quarter likely will not. We're putting some plans in place to make sure of quality of customer, less peers, so that would have an impact in terms of inwards. But in terms of quality, double play kind of customers, we'll continue to focus there and see what happens here in the first quarter.

And on CapEx?

On CapEx, Simon, first of all, about 25% of our capital budget is what we would consider just maintenance. If you look at other, a few other big buckets that are really associated with our growth drivers, basically, with respect to the Savvis and the hosting business, we'll spend between $330 million and $350 million in 2012. Our fiber-to-the-tower initiative, somewhat dependent there on finalization of plans by the folks that we're building the towers for or building the fiber-to-the-tower for. But expect to spend $250 million to $275 million there. High-speed Internet related, which would include our fiber-to-the-node continuation, which is a project that Qwest has had ongoing for several years, we expect to pass about an additional 1 million homes in 2012 with fiber-to-the-node. We'll spend $290 million to $320 million there. That includes extra -- additional capacity as well and modems for the fiber-to-the-node financial side customers, things like that. In our Prism and video, we'll spend, some of this is success based, but somewhere between $80 million to $120 million. So that's about $950 million to $1.05 billion, or so for the capital budget this year. And again, another 25% or so is maintenance.

Our next question comes from Tim Horan from Oppenheimer. Timothy K. Horan - Oppenheimer & Co. Inc., Research Division: Three questions, if you don't mind. What kind of speeds can you get on the fiber-to-the-node improvements or potential, anyway, in a couple of years? And how many homes do you think you can really economically build out to over time? And then secondly, now that you've really gone through a lot more, you're done with Embarq and looking at Qwest, are there any real differences in integration between Qwest and Embarq? And then lastly, why aren't you counting, maybe the pension hit as a little bit onetime in nature here?

Okay. First, Tim, regarding the fiber-to-the-node, we normally expect to get 20 to 40 megabits buildout. With that expected bonding, we can take that to 40 to 80 megabits. That's the range we're looking at on fiber-to-the-node. And as far as how many homes you can economically build over time? We're still working through that with technologies changing and improving all the time. We're about, I think, about 37% of our homes now built to the fiber-to-the-node, plus we have other direct, other loop shortening efforts and we have -- now we're getting 10 to 15 megabits in a lot of other areas without fiber-to-the-node, using just our loops. Even up to 25 megabits in a lot of our -- in all of our base level, of our Prism TV areas, which are not Qwest really not fiber-to-the-node. This are fiber builds and shortening, loop-shortening capabilities. So although we feel good about where our network is right now. We've got a lot of work in the network, and it's really a high-quality network in most of the cities we're in.

And Tim, just in terms of differences in integration of Qwest and Embarq. Really, the Embarq systems are more complicated than the Qwest -- I'm sorry, Qwest systems are more complicated than the Embarq systems were. Just if you take, for example, the conversion of the financial and HR systems, there were many, many more systems that surrounded the financial and HR systems that were feeding the Qwest financial systems that we had to provide interfaces for and things like that associated with the conversion to the ERP systems that we use. So it was a much more complex conversion than the Embarq conversion. If you look at the billing and customer-care conversions, there too, you'll have more complexities associated with Qwest than we do with Embarq. With respect to the employee benefit cost in the quarter, first of all, I guess there were not pension costs, which others, I guess, had called out as changes in the discount rate, impacting in their fourth quarter. This was really for us related to our long-term disability plans, and it was the result of the discount rate decline, as well as some other actuarial costs associated with medical insurance. But basically, we have that adjustment at the end of each year. It's just that it was higher in the fourth quarter this year than it typically is due to the decline in the discount rate primarily.

Our next question comes from Phil Cusick from JPMorgan. Philip Cusick - JP Morgan Chase & Co, Research Division: I wondered if you can delve into 2 numbers a little bit. First, on the business market side, the direct expenses have been ramping for the last few quarters. Can you talk about sort of what's driving that? You've talked about sort of adding to sales there in the past, but help us out there.

Yes, so that's it. Basically, you see some fluctuation from quarter-to-quarter with respect to CPE expense. That fluctuates kind of based on the CPE revenue that we see quarter-to-quarter. But the other driver of expense increases in BMG had really been the sales people that we've added over the past 3 quarters or so. So we ramped up the sales force to try to basically get to revenue stability hopefully on BMG, and it has resulted in improved sales bookings quarter-to-quarter. Over the last 3 quarters, we've seen higher bookings than Qwest had previously seen in the few quarters prior to the acquisition. Philip Cusick - JP Morgan Chase & Co, Research Division: And does that feel more sales-driven? Or is it an improvement in the overall business?

It's more sales-driven. We've really not seeing any difference, that we can tell at least, associated with the economy at this point. Philip Cusick - JP Morgan Chase & Co, Research Division: Great. And then on the wholesale markets revenue, the strategic revenue declined this quarter. I would think that with all the towers coming online that would continue to increase. What should we be thinking about there?

Yes. We had a couple of one-time adjustments in the fourth quarter that impacted the strategic revenue on wholesale. But again, it's just a one-time adjustment that we had there. Basically it's a settlement or accrual for settlement with a carrier, more or less. Philip Cusick - JP Morgan Chase & Co, Research Division: Okay. So without that, it would have continued its upward trajectory?

Yes. Without that, we would have had continued increase. We're very pleased with the fiber-to-the-towers that we installed during 2011 and especially in the fourth quarter and expect that to -- as well as copper circuits, as the wireless carriers continue to order the towers where we don't have fiber. So we expect to continue that trend of upward revenue hopefully on the strategic side in the wholesale business. Philip Cusick - JP Morgan Chase & Co, Research Division: Great. As long as we're on wholesale, maybe you can help us on the legacy side. Down 17% in 2011 versus '10, how should we think about that trending in '12?

Yes. Basically that's minutes of use-driven. Our minutes of use, were down probably a little over 15% in 2011. And what you'll see in 2012 is, with the implementation of the plan that the FCC has put in place, we'll see the Switched Access revenues over the course of the next few years decline significantly, pretty much go away. But the good news there is that we're hopeful that we'll get some relief on -- get some additional Universal Service Fund revenues associated with the broadband plan that they have in place, as well as, we got some flexibility to make some rate adjustments with our customers as part of that as well.

Our next question comes from Kevin Smithen from Macquarie.

I'm wondering when you think about the trade-off between higher operating expenses and getting to revenue stability sooner, how do you evaluate that trade-off going forward? And if you had the opportunity to go out and spend another $200 million or $300 million in 2012 to get maybe another 20 or 30 basis points of year-over-year growth exiting the year, is that a trade-off that you'd make? And at what point do you say, we've invested enough and we're drawing the line in the sand in OCF and free cash flow?

Kevin, a couple of things or points, I'd make, Stewart may want to follow-up. First of all, the legacy revenue losses, those are high-margin revenues, and we're going to expect to see that mix change. So they were just talking about with the minutes of use issues we have. That's going to be reduced. At the same time, we think we have really, strong opportunity to grow -- for growth in our major strategic initiative areas with our continued broadband expansion, with our fiber-to-the-node, with our Prism TV efforts and our fiber-to-the-tower. That's going to help stabilize our revenues and grow revenues over time. And then finally, the managed hosting cloud services, we think there's outstanding growth potential. Bringing all those together, we believe that we're on a good track to, where we can -- with the reduction in revenue losses this year, that we should see an evolution toward revenue stability and eventual revenue growth. So we feel good about what we're doing for specific opportunity, every one, it just depends.

And where do you expect to end the year in terms of year-over-year revenue declines exiting Q4 of 2012?

Not really ready. We'd rather see the year develop a little bit, but I mean we're comfortable in the 1.5% to 2% range for the full year.

Our next question comes from Tom Seitz from Jefferies. Thomas O. Seitz - Jefferies & Company, Inc., Research Division: The cable companies are increasingly talking about Wi-Fi hotspots. For now it's an add-on for their higher-tier broadband customers. I know you've done one-off Wi-Fi projects in the past. But is that something that you're looking at as a retention tool or potential opportunity down the line in connection with your broadband offerings?

Yes. It is and we're looking at it. Of course, we do have a number of hotspots across the country today. We're looking also for an opportunity to -- for offload opportunities for wireless carriers, even our Wi-Fi. So that's another area we're looking that we think could drive more traffic and then be a revenue generator. So yes, it is an area we continue to look at, Tom.

Our next question comes from Kathy [ph] From UBS.

Just 2 quick questions. First, hoping you can give us kind of your current thoughts on potential M&A over the next 18 months or so. And then second, related to that, I'm wondering if you can also give us your thoughts on some comments AT&T made about divesting access lines, what your appetite might be for access lines.

As far as M&A potential, we're focused today on our 4 primary growth areas that I just talked about. And we have also -- second, we're focused on integration of Savvis and Qwest, and we have to get that right. And so we're not -- we don't feel a need to go out and acquire right now. Doesn't say we wouldn't look at opportunities that came along that drove long-term shareholder value, but that's not our focus today. As far as AT&T, we won't comment on AT&T lines. We don't know what their plans are. We've heard those rumors for many years, a number of years now and we won't comment on that. But we don't think we need to just go out and buy access lines for additional scale. So if there's an opportunity there that drives shareholder value, we consider it. But it's not a real big appetite from our view today.

I'd like to hand the conference back over for any closing remarks to Mr. Glen Post.

Thank you. Turning to Slide 19, we are pleased with where the company exited 2011, and we feel well positioned to achieve our goals in 2012. Since 2011, we generated pro forma revenues of $18.7 billion, a 3.8% decline from pro forma 2010. Our revenue continues to shift toward faster-growing strategic services, now representing nearly 45% of our total revenue. And we expect that decline to be reduced, in revenues, to be reduced to 1.5% to 2.5% in 2012. Also, after several years of hard work from our dedicated employees, we have successfully completed the Embarq integration, and now we look ahead to completing the integrations of Qwest and Savvis, and we feel we've made solid progress in both of those fronts so far. Our local operating model continues to prove effective and show long-term benefits to our operating trends, as illustrated by the improved access line losses, the higher broadband subscriber growth and increased Prism TV customers we saw during the past 2 quarters. With our broadband suite of products -- product suite and the strong asset mix, we are gaining momentum across selling products throughout the business segments. We feel we'll see that continue to grow. And overall, we're pleased with the quarter results and are optimistic about our business. So thank you for being on our call today, and we look forward to speaking with you in the months ahead.

Thank you. And 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.