Good day, ladies and gentlemen, and welcome to the CenturyLink's Second 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, Sayeed. Good morning, everyone. We apologize for starting a few minutes late and appreciate your patience. But welcome to our call today to discuss CenturyLink's Second Quarter 2011 Results released earlier this morning. Unless otherwise noted in the press release or in our remarks and related materials this morning, the second quarter results discussed in the press release and during this call relate to CenturyLink, Inc., including Qwest, effective for the full quarter, but excluding Savvis. Savvis’ results for second quarter 2011 are addressed separately in the release and our prepared remarks for today. Savvis is otherwise only included in the 2011 outlook information provided for full year 2011 and pro forma full year 2011. 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 Q&A. Turning to Slide 2, it contains our Safe Harbor language for your information. We will be making certain forward-looking statements today, particularly as they pertain to guidance for 2011, the integration of Embarq, Qwest, and Savvis and other outlooks in our business. We ask that you review our disclosure found on this slide, as well as in our press release and 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 early this morning and the slide presentation and 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 in our earnings release and on our website at www.centurylink.com. Now turning to Slide 3, the participants for today. Your host for today's call is Glen Post, Chief Executive Officer and President of CenturyLink. Joining Glen on our call today is Stewart Ewing, CenturyLink's Chief Financial Officer. And 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 August 9, 2011, and accessible for webcast replay through August 23, 2011. And for anyone listening to a taped or webcast replay of this call or for anyone reviewing a written transcript of today's call, please note that all information presented is current only as of August 3 and should be considered valid only as of this date regardless of the date listened to or reviewed. So as you to turn Slide 4, I'll 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 second quarter 2011 operating results, as well as selected operational updates and 2011 guidance information. We delivered solid financial and operational performance for the second quarter of 2011, including revenue in line with our guidance range and improved access line trends. Our second quarter 2011 results are significantly impacted by noncash accounting charges resulting from purchase price accounting for the Qwest transaction. These charges significantly impact our net income and earnings per share as depreciation and amortization increases as we amortize the value assigned to the Qwest customer base. However, it's very important to note that the purchase price accounting adjustments have no impact on the cash flows of the company, and also the accounting adjustment should not in any way affect the economics of the Qwest acquisition. We continue to believe the Qwest transaction is a great strategic combination to improve the growth characteristics of our combined company. Initial Qwest integration efforts are underway, and we have now implemented our local operating model in the legacy Qwest markets. Synergy achievement in the second quarter is in line with our expectations. Additionally, on August 9, we expect to launch a CenturyLink brand into Qwest markets. Also, the final Embarq conversion was completed in late July, marking the end of all major integration activities associated with that transaction approximately 25 months following the close. We have a couple of smaller systems conversions left, but the vast majority is now done. And we're on track to achieve the targeted $375 million in annual run rate synergies later this year. Additionally, we're pleased to welcome Savvis to the CenturyLink family following the close of the transaction with them on July 15. Now moving to Slide 5 in the deck, I'll…

Thank you, Glen. During the next few minutes, I'll review some of the highlights of our second quarter 2011 operating results and will conclude my comments with a discussion of 2011 guidance provided in our earnings release issued earlier today. Turning to Slide 12. I want to begin by reviewing with you a couple of special items that occurred during the second quarter, and then I'll discuss the second quarter normalized results. First, we incurred approximately $245 million of pretax expenses or about $0.26 per share related to integration, severance and retention cost associated with the Qwest integration. Second, we incurred about $25 million in pretax integration and severance costs or about $0.03 per share related to the Embarq acquisition and $2 million in pretax transaction and integration cost related to the Savvis transaction. These special items were offset by favorable settlement of an operating tax issue of $12 million or $0.01 a share. Non-operating items include Bruce facility costs, net of interest on the settlement of an operating tax issue and the tax benefit from reduction of an NOL valuation allowance, which together, accounted for about $0.01 of share as well. In the aggregate, these items represent the $0.27 per share difference in normalized diluted earnings per share of $0.44 and GAAP diluted earnings per share of $0.17. Now turning to Slide 13. This slide reflects CenturyLink's results for the second quarter 2011 compared to pro forma second quarter 2010, excluding special items for both periods as outlined in our financial schedules. Please note that the information on this slide includes Qwest results for second quarter 2011 and pro forma second quarter 2010 as if the Qwest merger occurred as of January 1, 2010. The final column titled actual 2010 does not include the Qwest results and really includes…

[Operator Instructions] Our first question comes from David Barden.

So I guess, I mean, obviously, the stock came off pretty hard today because of some of the uncertainty around the trying to sort out what was Savvis and what was core business changes and what was going incrementally right. But I guess -- so is the take away here that we're adding about $1 billion of Savvis revenue, that's a little conservative relative to what the Street was expecting for them to deliver for the year. If you could comment on whether there are eliminations in that and whether you're just trying to maybe take a swag at being more conservative on that. That’d be number one. And then number 2, it sounds like if I look at these earnings per share impacts, it looks like you're taking about $50 million of kind of EBITDA out of the old guidance for lower CPE sales and some new contracts. But at the same time, you're not really adding anything back for any potential improvement in integration for Savvis relative to that $275 million EBITDA number which looks very much in line with the Street. So could you kind of reconcile some of the conservatism that you seem to be baking into the Savvis outlook and your kind of underlying estimates for the core business and kind of how we should think about whether -- is this business getting better or is this business getting worse? Because I think that's what the market is trying to figure it out relative to what you told us last quarter.

So David, let me take a shot at it and come back with a question if I don't completely answer you. So in Savvis, our intent here in no way is to really take down their guidance from what they had previously given or from kind of where the street is on a consensus basis. We do have about $1 million a month of revenue that will go away with respect to Savvis from adjustments related to revenue that they have deferred. Probably 75% to 80% of that also is deferred expense that will go away as well, and there are some minor eliminations between CenturyLink and Savvis that'll occur, but nothing really significant. So really, if you look at Savvis, I mean, again, we're not really -- their previous guidance was $1,030,000,000 to $1,060,000,000 of revenue, and we really feel very, very comfortable with the range, in fact, really kind of the upper end of that range. Also, with respect to their EBITDA margins, they were -- if you exclude the noncash comp that they exclude and get to their adjusted EBITDA that David [ph] talked about previously, they were about 27% in the second quarter, which is about where they expected to be. So they really had a good quarter. Their bookings were good. Their backlog of bookings continues to be strong, and that does not include any positive impact that we may get from the combination associated with any cross-sell opportunities. We've not built any of that in. So that should pretty well cover Savvis. In terms of -- why don't you reiterate the part of the question I haven't answered now, and I'll see if we can get…

Well, I guess, if we're feeling pretty good about Savvis and we're subtracting all the higher end of estimates of Savvis out of our core estimates for the existing guidance, it seems to suggest that the underlying business just isn't doing as well as we thought it was going to do a quarter ago. And is your message that things just aren't going well? Or are there some offsets here that we should be thinking about?

So the message basically from a revenue standpoint is that, basically, CPE revenues are going to be down compared with what we expected a quarter ago when we gave our pro forma 2011 guidance. And the CPE declines will be from a revenue standpoint, about $90 million, which equates to about a $0.03 a share in EPS. The reason it's down is associated with 2 things. One, the government sales -- sales to the government agencies has been down, which basically, we think, is probably attributable to the budget issues that the government's been going through. Other CPE sales, we seem to be having as many sales as we've had in the past. However, those sales seem to be at lower average amounts. So the sales folks are still selling CPE. They're still selling about the same number of transactions that they had a year ago. It's just that the transaction sizes are down. The other revenue declines of about $60 million or so, which really equates to, again, about $0.06 a share in EPS, is really just due to, again, some rate changes that we've made to access rates, intrastate access, also to the local rate, the local access line losses, as well as minutes of use, primarily minutes of use on the access side. So I guess I'd have to say to sum it up, we're a little bit more -- we're coming off the guidance that we gave last quarter slightly on our revenue and EPS, but most of it, most of the revenue side really relates to CPE. Most of the EPS side really relates to kind of the legacy business more or less and legacy revenues.

And so I guess my last question, is related to -- so the revenue slide is a little bit more than we expected, but we didn't have what you guys are calling operating cash flow guidance before. We can't really compare whether your outlook for maybe the cost side of the equation is more optimistic relative to what your previous expectation was because we can't compare what it was before to what it is now. Overall, are you optimistic about how your -- ability to track to these revenue, incremental revenue declines on a cost perspective, it can be done? Or is this going to drop right down to the EBITDA expectation as well?

Well, some of that is really dropping down to the EBITDA expectations as well in the guidance that we're giving. And the reason, one of the reasons we decided to give operating cash flow guidance is because we think that on a longer-term basis, it'll be easier for you guys to track that and it doesn't vary because of -- like free cash flow does because of changes in capital expenses, expenditures from quarter-to-quarter and things like that. So I think that we think we can reduce some of the expenses associated with the revenue declines. But I'm not saying that we can get all the way there. So there will be some deterioration in EBITDA in the latter half of the year.

Our next question comes from Batya Levi.

Three things. I also had a question on the guidance. First, just looking at the current guidance, excluding Savvis in the first half of the year, you're increasing it by about $300 million. Savvis adds about $500 million. You talked about $150 million of pressure from CPE and other. Can you talk about what the remainder $140 million pressure would come from? Also, looking at your prior guidance, you were thinking about exiting the year at about 2% to 3% revenue decline in 4Q. How do you think about that right now? And if I look at your year-end guidance for revenues and guidance for third quarter, the implied guidance for 4Q actually looks for a nice sequential increase. Can you talk about where that's going to come from? It's both on the revenue side and EBITDA side.

Okay. Batya, I may have to clarify, but let me answer one part of the question first. On the last call, we indicated that we felt like when we got to fourth quarter, our revenue decline fourth quarter of 2011, and this excludes Savvis, would be about -- to the fourth quarter 2010 on a pro forma basis, would be about 3%. With the additional revenue declines that we're building into the revised guidance, basically, we now think that will be about a little less than 4.5%. So but and the changes there basically about a $70 million change -- or increased decline rather, the CPE is $30 million of that, and again, that's lower margin revenue, and other legacy revenue declines is about $40 million of that. And that's made up of just a combination of items. So again, fourth to fourth now versus the 3% we talked about last quarter, we think it's more like 4.5%, but just about half of that is really related to CPE. So did I get your question with that? Because you said guidance, excluding Savvis, increasing about $300 million now.

I'm a little confused with that part again. $300 million is the increase in guidance, but Savvis adds about $500 million of revenues in the second half. That's offset by $150 million pressure from CPE and other. Where is the remainder pressure coming from?

So Savvis is about -- I mean, Savvis is about $500 million in the last half of the year, and I guess what I've explained is about -- yes, I think it's rounding, Batya, to get to the $300 million.

Okay. Can you talk about the trends for 4Q? Should we expect some sequential improvements both on the revenue side and EBITDA side?

On the -- we'll continue to see some decline on the revenue side, but again, the decline on the revenue side will be offset by lower expenses because some of the seasonal expenses that we typically incur in the third quarter will go away. So again, on an EPS standpoint, we're expecting fourth quarter to be approximately the same as third quarter. So the decline in expenses from third to fourth should pretty much offset any legacy declines in revenue that we have from third to fourth, such that on an EPS basis, it should be neutral.

Our next question comes from Simon Flannery.

Glen, we talked about use of free cash flow and considering options next year, as well as a focus on deleveraging. Do I take it from that that you're unlikely to make any major acquisitions over the next 18 months or so? Obviously, you've done a lot here in the recent past, but there are certainly questions out there about your interest in looking at other opportunities. So if you could comment on your appetite for acquisitions, large or small. And then, Stewart, just a clarification on the amortization changes. I think you've noted this is not final. Just talk about any sort of potential volatility around that. And also, around just how that flows 2011 to 2012 and beyond, what's the sort of -- is it a straight-line type amortization or does it -- is there an accelerated component?

Simon, regarding the acquisitions, right now, our focus is really on integrating -- we really completed now the Embarq integration for all practical purposes. We're now focused on Qwest and Savvis and the integration processes there. And that's really what we're about right now. We don't know of any large acquisitions, opportunities that we would be interested in out there today. So I don't think we'll be -- there's nothing that we know of at least that we would be looking at. It’d have to be something extremely attractive, extremely good price that clearly could drive shareholder value, and I don't know what that would be today. So our focus right now is strictly on the integration work and really executing our business plans.

Yes. Simon, with respect to the amortization, so the actual amortization and depreciation in the second quarter was about $291 million. And you can annualize that, but it will be declining somewhat because at least, where we are now, and again, we're not final, we are using the sum of the years digits method to amortize the customer base that is allocated to the RMG group and the BMG group. But the wholesale -- the part that's allocated to wholesale, we’re amortizing straight-line at this point. That may change because we are still looking at this. So about $7.5 billion was allocated to the customer relationships. And again, we hope to have this finalized pretty much by the end of the third quarter. But we have, I guess, until sometime next year to get it finalized. But we're working with the appraiser to try to get it final. We felt like we had better information than we did at the end of first quarter when we originally gave our guidance on this. So we felt like though, that even though we weren't final, we really needed to reflect the most current thinking. We don't think there'll be material changes for the day, but there probably will be some changes.

Our next question comes from Phil Cusick. Philip Cusick - JP Morgan Chase & Co: I wonder if we could hit a couple of things. First on the Qwest high-speed losses, can you go into a little bit, what happened there and how you've addressed it?

Phil, I'll ask Karen to address that for you.

In terms of the high-speed losses, what the situation is at hand is that we've had good inwards. However, we want to change the quality of mix of the customers to less standalone. And what we're doing is, we’re rolling out some new bundling programs that we can improve our product attachment rate, because we all know that churn’s better, the more product attachment rate you have to a customer. So essentially, that's it in a nutshell. Philip Cusick - JP Morgan Chase & Co: Okay. Was there incremental competition during the quarter that you're now addressing or was it just sort of steady and then…

No. I would say from a competition standpoint, from a price point, not a lot of change. There might be pockets here and there but nothing extraordinary. I would say from an advertising standpoint, they did go hard after the change, the conversion, the acquisition. So not handing your customer off to an unknown [ph] company like CenturyLink, we've combated that with really some good, I think, competitive positioning and advertising, and our brand advertising rolls our here in the next couple of weeks. So other than that, there's not been massive pricing change. It really is about the standalone versus a bundle customer mix. Philip Cusick - JP Morgan Chase & Co: Okay. And so you said the marketing rolls out on a couple of weeks, the expectation for an improvement in the third quarter, is that sort have been demonstrated so far or that's the expectation based on new marketing?

Actually, we're pleased with changes that we've made in terms of looking at, going after high propensity churn customers and adding product, as well as our approach. In terms of our new go-to-market that we rolled out, the response -- our response rates are much improved when you look at sequential quarter-over-quarter. We feel good about that. It's just the mix of the customer that we want to get more product attachment on. Philip Cusick - JP Morgan Chase & Co: Okay. And then separately, guys, can you talk a little bit about the Qwest enterprise business? You haven't really addressed that on the integration. How are you thinking about it as it relates to Savvis and then the rest of the business addressable market?

Well, Bill, just one other thing on what Karen was saying, just a reminder that our gross sales increased year-over-year on HSI. So it's more of a churn issue as we talk about on any -- not a competitive issue necessarily as much as a churn issue on the a stand-alone HSI, we expect higher churn and we really saw it. That's what happens in these Qwest markets. Regarding enterprise, we -- enterprise remains steady during the quarter. They actually increased quarter-over-quarter, a little higher in the second quarter than it was the first and sequentially, as far as revenues. We believe that the combination is really going be strong with Qwest, the cross selling with Qwest and Savvis. We've already begun customers bids. There’s some -- a great amount of interest in the cloud product, and with the Savvis customer, a great amount of interest in the network capabilities that CenturyLink brings. So we're very optimistic that we're going to see revenue synergies here. Of course, we have not forecast any of those, but in initial [indiscernible] customers, as well as our sales leaders, we're seeing a lot of optimism in what's expected there. So I think the combination, as we expected, with the network and the cloud product, hosting product that Savvis brings is going to be very effective.

And our next question comes from Scott Goldman.

Also a couple of questions. I guess a different question on guidance. If you look at your CapEx guidance previous to current where the difference would really be layering in Savvis. It looks like you're bringing guidance up by about $250 million to $300 million, which I think is a little bit more than what Savvis was guiding for the full year. So wonder if you could talk about what's involved with the CapEx increase beyond Savvis. And within that, are there expectations? Have you guys made any decisions on bringing IPTV into the Qwest markets?

It's really pretty much rounding. I mean, maybe the guidance is up $50 million or so related to the legacy CenturyLink, but it's -- look at CapEx from Savvis. Theirs is basically up to $240 million or so. So it's pretty much rounding I think that's getting us…

Okay. So no change to the fiber to the cell or IPTV plans from what you guys have talked about previously?

No. We're still in the midst of the fiber to the cell and fiber to the node programs. Those are unchanged from our discussion last quarter. We still expect to get fiber to about 6,000 cell sites this year. We'll have additional cell sites that we'll build next year as well, as well as probably in 2013, and fiber to the node will continue to be on track there. I'll let Glen address any IPTV.

Yes. Just a little follow-up there, probably the $50 million or so you talked -- it's more capacity side in the Qwest market. We see opportunities there to add capacity that could generate revenue opportunities for us. So a little more aggressive there in a few markets where they've built up, had partial build-outs, haven't finished build outs in some markets. So I think we'll be looking at additional capacity opportunities there, for sliding, a little bit -- talking about the $50 million increase or so there of what Savvis will bring to the table. Regarding IPTV, as I mentioned earlier, we're having good results in our markets overall. For competitive reasons, we won't talk, say too much about what we're doing, but I do think we'll be looking to roll, to begin build out in at least one Qwest market by year-end, buildout of IPTV products, roll out sometime next year. So that's kind of our view and, again, we’re looking to a great extent, like success base, we continue to see success in the CenturyLink markets that we have in the first build out of the Qwest, we see continued success. There is demand in the market. There's no question. There's demand for this product in the market. It's a quality product. We think it competes well with cable. Actually our customers on our surveys said it's a better product than what cable has in most cases. So we're confident. It's just a matter of significant plant situations, plant conditions, loop shortening opportunities as far as the economics of building out in the Qwest markets.

Okay. And then if I could follow-up the Phil's question just on the Qwest high-speed Internet churn. I guess it just didn't make entire sense. I understand you had good inwards, but you're seeing churn from these standalone broadband customers. Is that -- what would cause them to churn as you guys focus more on bundles? Did you try and raise pricing on the standalone broadband to encourage them to move to bundles, and that's what caused them to leave? Or is something else that caused that churn to pick up there?

No, no. If you just look at your churn, your profile of your high-speed customer, it's a customer that has another product, say, a double play or a triple play or a standalone customer. Your standalone customers just have a higher churn, 23 basis points higher. And so therefore, if you get a higher mix of your stand-alone, you're going to have more churn. So our objective is to take those standalone customers who are good customers, they just have higher churn, right, than a bundled customer and try to get them into a bundle. But we have not done any price increases or such.

Okay. So I apologize for beating this one down. So did churn within those customers pick up meaningfully from prior quarters, and that's why we saw a bit of weakness in the HSI adds? And if you could give us any sense for what percentage of Qwest subscribers are standalone broadband subscribers?

We're not going to give you the percent, but yes, it was prior higher standalone sales prior to close, and it does have higher churn. So as Glen said earlier, our inwards this second quarter were strong. It was more of a churn issue, and the churn issue was caused by a higher mix of stand-alones than we anticipated.

As well as promotions rolling off as well. I think that had something to do with it.

Our next question comes from Chris Larsen.

I just wanted to follow up on a couple of things. First, if I can characterize, it seems like just all the EPS changes, it's just that $0.09 that's operational. And secondly, you gave some pro forma figures in the beginning, about 5% revenue declines. Those pro forma figures, do those include the eliminations or is that 5% excluding the eliminations on a year-over-year decline?

Yes, it includes the elimination so it's basically what we would expect to report.

Okay. And then you mentioned some price changes, some of it on minutes of use. But you also mentioned the inmate business. What specifically was going on with the inmate business that you are lowering prices there?

Not really lowering prices on the inmate side. We had one competitive bid situation with a current customer that we have that we lost and expect to churn off in the second half of the year and transition to the new provider there. The price -- the intrastate access changes, that really actually related to the approval process that we went through with respect the Qwest acquisition. One of the states required us to reduce intrastate access rights a bit.

And lastly, a lot of the focus obviously is on things that seem a little bit worse. But we did see that access lines got a little bit better. What specifically, Karen, do you think is driving the improvement in access line changes? Is it anything that you've done in the Qwest territories, or is this across the board or is this some better housing dynamics, perhaps in the old Embarq markets, that are helping you with the access line declines getting 80 basis points better than they were a year ago?

It's driven by better -- just less outs. From a go-forward standpoint, that is our objective, is to improve the bundle with voice or other products. But right now -- or video. But right now, it's just less outs. The ins are still down year-over-year, but they're improving, but I wouldn't say a massive improvement there. It's really about the disconnects being less.

I had one more question. Stewart, you had said you're continuing with a fiber to the node for the home build outs in this Qwest territory. The Qwest have been doing about 1 million a year homes. Is that still what you're targeting this year for fiber to the node?

Yes, it is. We're continuing with the program that they had.

Our next question comes from Michael Rollins.

First question I had was, can you talk a little bit about, in the quarter, maybe how the Qwest assets did relative to the Century just in a little bit more depth and maybe a sense as you look at the revisions to guidance, it sounds like the access side was more on the Qwest side? Is that true on the CPE front as well? And then the other question I just had was with regards to the questions that you're wrestling with in terms of finalizing the intangible amortization. Just as I think back through a series of mergers that we've got to observe over the course of time, it seems like that's been -- once the deal is closed and the books are closed, it's become a pretty final number. We haven't seen a lot of movement in what the companies have guided or produced once the deal is closed on an intangible basis. Is there something that's different or unique about your circumstances with the way the Qwest acquisition was structured or the way the Savvis deal was structured that's creating a little bit more of that uncertainty or question over what the final numbers will look like?

No, Mike, really, what we tried to do is estimate the amount that would be allocated to customer base and the amortization to be pretty much in line with what we did with respect to the Embarq and the way the purchase price was allocated. And I guess what we've subsequently found out after getting an appraiser in and going through the appraisal process with them is it looks like the accounting professions will actually change their process somewhat because if you -- we've gone through and listed out a number of transactions that have happened over the last 3 or 4 years, and the amount allocated to the customer base seems to be increasing from about 10% or so of the purchase price that we used in the Embarq transaction to about 30% to 35% of the purchase price in more recent transactions. So I think that's basically what's happening there, so it's nothing structurally different about the Qwest transaction. I think it's just more or less a change, it seems like, in the appraisers' approach to valuing the customer base.

I might talk a little bit about the synergy issue. We anticipate that we rolled out our -- talk about the operational synergies, the $575 million. That was back in early part of 2010. Over the past 12 months, Qwest took out a huge amount of cost out of the business between the time we were estimating our synergies. We're still saying we'll hit our targets in spite of all the cost they took out. But it is a tougher hill when they took out so much of what we had initially counted as synergies ourselves. They took that out of the business. So we still think we'll -- we're confident we'll hit our synergy number, but they did a good job reducing cost over the last 12 months before we closed.

Yes. And with respect to the revenue decline, Mike, the -- half of the decline really or a little better than half is related -- or about half is really related to CPE. Most of that is in the BMG side, the segment that basically sells to larger business customers. So that's where most of that CPE revenue decline is occurring. The other legacy revenue declines are -- there's not much difference between the amount that we're experiencing at the legacy CenturyLink and the legacy Qwest there. I'd say that's basically split pretty much equally.

And can you give us a recap of where you stand with the regulatory side, with high cost, federal USFs, switched access and then your cost of access in terms of trying to understand what the implications of the reform proposal that you signed onto would mean for your financials over time?

Mike, I'll start out. Basically the -- we do support the plan. We don't think the status quo is good for us, for us or our customers. The communications environment is changing rapidly, either the technology shifts and evolving customer demand. So we think this is a good plan. The plan's been rolled out, it's not perfect, but it does represent a rational compromise proposal that we believe makes significant strides towards reforming several critical elements that will ultimately be good for consumers and for the companies and the marketplace. We'll make some meaningful short-term concessions, but we think ultimately they'll provide long-term stability and predictability related to Universal Service support and inter-carry [ph] the compensation payments. The transitional develop -- transitions developed in the plan are aggressive but we believe they're certainly manageable for us and the first of several steps to reduce switched access could begin in January if approved, but there is a phase in approach, and given the accelerating declines of intrastate switched access -- I mean, some of which we've talked about today already, there’s reasons for our guidance changing some. We view the transition really ultimately as being really needed as a stabilizer in minutes of use and in revenues going forward. Stewart, do you want to address any..

Yes, and on the USF at switched access, I have to go pull that to be specific. But I think as I recall on a pro forma basis, USF and access was about 7% of total revenues and I think about 3% of that was USF, if I remember right, 4% access.

And do you have a sizing of how much the termination costs are that you pay? So I think the premise was that Qwest was in a significantly different position on the inbound versus outbound of terminating access revenue and costs relative to what you or Embarq might have been at in your heritage operations. So do you have a sense of what that cost number is today as we try to think through the different moving parts from the proposed framework?

No. I'll tell you that's something we'll try to get and maybe try to have. As the new access and broadband plan moves to the FCC, we can try to give you more color maybe on what our access costs are relative to our access revenue and what any changes that are proposed might result in.

Our next question comes from Michael McCormack.

Stewart, can you just give us a little more color? I mean, just looking at the Business Markets group versus wholesale, it clearly looks like you've had some movement of Qwest's, formerly Qwest business markets revenue into wholesale. I think that's what I'm seeing here, but some clarity on that would be great. And then in data integration, the pro forma 2010 number looks a lot like data integration of Qwest historical, which had been tracking from 145 into 170 at Q4. And now obviously a number that's much lower than that. So just trying to get a sense, I know you mentioned in the release there's just some pressure there but trying to get a sense for exactly what that is. And lastly, on use of cash, I mean obviously your stocks are down fairly significantly right now. It just seems with an after-tax cost of equity with this dividend yield of 8.3%, that doing something sooner rather than later on the stock repurchase might make some more sense.

So Mike, there's really no switch between -- or no reallocation between BMG and wholesale markets in terms of revenue. Basically, there were some -- we're basically allocating customers to the BMG group and to the RMG group, and there were some -- RMG picked up some of the BMG customers and some of the smaller customers, some of the state government customers using the local model in the RMG group might be closer to. BMG picked up some of the larger enterprise customers that RMG had, legacy CenturyLink RMG. But we're basically doing that division similar to the way Qwest has done it in the past on a customer basis. With respect to wholesale, though, there's no real change there and no movement of customers from any segment to wholesale or from wholesale to other segments.

Just sort of looking back at the Qwest second quarter reported results and business markets group is over $1 billion run rate and you’ve got 961. I would have thought that adding Embarq, and to a lesser extent, legacy CenturyTel, would have had a more positive impact.

So again, there's very few customers that we moved over to BMG from RMG. I can go back, Mike, and try to get that for you, to basically be able to talk you through that.

We can take it offline, that's fine.

I mean, if you look at the 3 months, the -- in BMG, basically, we only had $67 million of revenue, if you look at second quarter a year ago in legacy CenturyLink. So most of the -- and so that was basically what was moved from legacy CenturyLink over to the BMG segment. Yes, Mike, some of that could be elimination of intercompany revenue, too, as well as elimination of some of the deferred revenue. Some of that was allocated to wholesale as well. We can get the details and get that to you so you can reconcile that.

Okay. And on data integration turning around?

In terms of data integration and the reason we're missing that, again, it's really -- most of it is on the BMG segment and really, most of it, and as far as we can tell and Chris can tell, is really due to government spending slowing down on CPE, which is what the data integration services primarily are, as well as just the smaller average deals that they've obtained -- that they've sold this year. Again, the indication is that they've sold about the same number as they have in the past, but the average size of each transaction seems to be smaller than they experienced last year. Also, if you look at our guidance, BMG had a big fourth quarter last year in terms of data integration revenue, and again, we've scaled our guidance back because we really don't think we'll get to the same fourth quarter, again, of one-time revenue associated with the data integration that Qwest had in the fourth quarter last year in their BMG group.

And is it related at all to a change in the government's view on how quickly or whatever you're going to do on the networks contract?

I don't think it has anything to do with that. I think it -- the indications are, it's just basically slower movement from the government, and we're attributing some of it to basically just the debt ceiling issue and basically the government slowly spending down to wait to see what transpired there.

Okay. And on use of cash?

Yes. I'll just tell, Mike, obviously, we think our stocks -- I personally believe it's an amazing buy right now. We'd likely buy it back. We are committed to buying back or to reducing our debt by $1.5 billion to $2 billion over the next 2 years, and we'll just have to look at stock buybacks. We really don't plan to do anything before early next year. Anyway, we take a look through the rest of this year. The -- I'm looking at, again, our buyback program, use of our free cash flow. But it's certainly a consideration for us, especially with the stock price where it is now.

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

Thank you. In closing, CenturyLink, we believe, had a solid financial result for the quarter, improving top line revenue trends, strong cash flows. We are also pleased to have closed the Savvis acquisition. And we're looking forward making solid progress integrating Qwest and Savvis in the months ahead. The last few months have been truly transformational for CenturyLink, and we believe we are well-positioned to provide customers the innovative products and service they need. I'm confident we'll continue to see solid growth in the months ahead and create long-term shareholder value. We appreciate your participation in our call today and we look forward to speaking with you again in the weeks and months ahead.

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.