Good day ladies and gentlemen. And welcome to CenturyLink's First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Tony Davis, Vice President of Investor Relations. Mr. Davis, you may begin.

Thank you, Saeed. Good afternoon, everyone, and welcome to our call today to discuss CenturyLink's first quarter 2013 results released earlier this afternoon. The slide presentation we will be reviewing during the prepared remarks portion of today's call is available in the 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 two, you will find our Safe Harbor language. We will be making certain forward-looking statements today, particularly as they pertain to guidance for second quarter and full year 2013, the integration of 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 in our SEC filings, which describe factors that could cause our actual results to differ materially from those projected by us and 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. 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 three, your host for today's call is Glen Post, Chief Executive Officer and President of CenturyLink. Joining Glen 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; Bill Cheek, President of Wholesale Operations, and Jeff Von Deylen, President of Savvis. Our call today will be available for telephone replay through May 15, 2013, and accessible by webcast through May 29, 2013. 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 today, May 8, 2013 and should be considered valid only as of this date regardless of the date heard or viewed. As we move to slide four, I’ll now turn the call over to your host today, Glen Post. Glen?

Thank you, Tony. Good afternoon, everyone. Thank you for joining us today to discuss CenturyLink’s first quarter 2013 results. We will also provide guidance for second quarter and update full year 2013 guidance, as well as other important updates about our business. We are pleased with our first quarter results and we continue to make good progress on a number of fronts. Starting on slides five, I’d like to begin with some highlights from the quarter. We continue to generate solid operating results from subscriber metrics. Our annual rate of access line loss improved to only 5.7% in the first quarter 2013 from 6.4% a year ago. Also we achieved better than expected broadband net ads of 66,700 in the quarter. This is obviously strong performance for the quarter. However, we do expect broadband subscriber growth to be significantly lower in the second quarter due to normal seasonality in our industry. During the quarter, we added 13,400 Prism TV customers ending the period with 120,000 subscribers. We also believe video is an important product for our residential customers and we continue to rollout the service to new markets. From a business markets perspective, we experienced strong new sales to business customers across the company for network and hosting services in the quarter. Our business strategic revenue grew over 6% in the first quarter 2013 compared to the same period a year ago, and we continue to see high demand for Ethernet and DSL and Wavelength services as they grew over 15% year-over-year. In early January we announced and implemented an organizational realignment that merge our entire retail consumer and business network services operations in to a single operating group led by our Chief Operating Officer, Karen Puckett. The key objective in this realignment was to ensure that we provided a…

Thank you, Glen. I will spend the next few minutes reviewing the financial highlights from the first quarter and then conclude my remarks with an overview of the second quarter and full year 2013 guidance we included in our earnings release issued earlier this afternoon. Turning to slide 12, I will be reviewing the results excluding special items as outlined in the earnings release and associated financial schedules. With that let’s move to our first quarter results. As you can see we generated solid operating revenues and cash flows. Operating revenues were $4.51 billion on a consolidated basis, at the top of our guidance for the quarter. It represents a 2.1% decline from first quarter 2012 operating revenues. Strategic revenue in the quarter increased to 47% of total revenue from 45% in the first quarter a year ago due to growth in strategic products such as high-speed internet, high-bandwidth data services, Prism TV and Managed Hosting Services. Adjusted diluted earnings per share for the quarter was $0.76, exceeding the top end of our guidance by $0.04, which was primarily as a result of our first quarter operating expenses being lower than we had anticipated. As we’ve discussed on prior earnings call, adjusted diluted EPS excludes special items and certain non-cash purchase accounting adjustments as outlined in our press release and associated supplemental financial schedules. Total cash operating expenses decreased from first quarter 2012 to first quarter 2013. This decline was primarily the result of lower personnel related costs which were partially offset by higher data hosting and network costs. We generated strong operating cash flow of approximately $1.93 billion for the first quarter and achieved an operating cash flow margin of 42.8%. Additionally, we generated $1 billion of free cash flow during the quarter, which is defined as operating cash…

(Operator Instructions) And our first question comes from David Barden from Bank of America.

Hi guys. Thanks a lot for taking the question. Nice quarter to start off the year. A couple of questions if I could, first, Stewart, the buyback was very aggressive. You’ve got about a third of the $2 billion buyback that you budgeted over the neck over the two years behind you now. When you say opportunistic, should we imagine that what you're really going for is a strict $1 billion of buyback this year, a strict $1 billion of buyback next year or if the opportunity presents itself, how aggressive would you be prepared to be within the context of the full $2 billion buyback authorization? And then second, just on the data center business, we've seen some very strong results from a lot of the data center companies out there. You talked about this quarters softness in terms of sequential growth was really in part a function of softness and billings in the third quarter. You saw strength in the fourth quarter. You saw strength this quarter in terms of bookings. Should we be expecting a nice acceleration starting in 2Q and if so, could you kind of size up, what kind of growth we should be expecting from that unit? Thanks.

So David, I’ll answer the first question. So we were aggressive and by being opportunistic, I mean, we will potentially spend more than half of the program in 2013. It really just depends on the stock price and the opportunity to accumulate more shares at lower prices. So I think we’re pretty aggressive. We’re not going to continue in all likelihood at the same pace that we did. We don’t expect to get -- we still expect to get the program done within the two-year period that we announced. But we would expect just to probably in the year at a little bit higher than $1 billion. But again just really dependent upon the opportunity.

I will comment on that, to speak to the question, it’s like a question a little more detailed. But we feel that the first quarter hopefully in the low point for our data hosting sales, helped along the momentum we believe in our network group for cross-selling opportunities, we have a new Savvis Direct product coming out and we pointed out, the sales were strong in the fourth and first quarter. So we feel good about where we are headed here. We don’t disclose exactly our growth target here but Jeff can address some things we're doing here and we are optimistic about the rest of the year. Jeff?

Again in the third quarter that books for that new sales sold in that quarter was a low point. I think that the good news is Q4 and Q1 our new sales were on our plan and we are about 30% higher than that Q3 low point. One of our other big initiatives in 2013 is leveraging the CenturyLink channels, got significant sellers, 400, about 5000 enterprise customers that we are really -- there is some early good signs, a good program got really launched at the end of fourth quarter, early first quarter and the results in Q1 were pretty positive, we were about 10% up from our Q4 sales. It gives us confidence in terms of our go forward -- this Q1 number is the low point and we will grow sequentially from there. I think the one time -- the headwinds we have are currency and then we talked about the technology migration as some of our customers migrate from discrete hosting to more cloud based services. There is some price erosion pressure. Our team there is very focused on catering those customers, retaining up and we will grow with them. So that’s the kind of the key points that we are trying to execute on.

Our next question comes from Batya Levi from UBS.

Wanted to ask about consumer margin, the 65% was the level that we haven’t seen in over two years and despite that you have more IPTV in the business, I assume that is slower margin business. Given the headcount reductions that you announced, should we assume that this is a sustainable level going forward or do you anticipate some pressure going forward?

No Batya, we really just anticipate some pressure going forward in the consumer segments that we’re growing our margins down somewhat, closer to really -- in the low 60s probably. We’re really just in the second quarter starting to roll out the Prism TV and start to incur some expenses there. We have additional markets as Glen mentioned that we will be rolling out during the year. So we expect to see increase this quarter with some of the strategic products including Prism which are in the consumer segment. So we expect to see that margins to come down.

Our next question comes from Frank Louthan from Raymond James.

Can you talk a little bit about your business services organization and what sort of benefit that you are seeing from that year to date?

Frank, Karen, good afternoon. Business services, so the realignment has been very helpful in terms of a cohesive go to market and in particular some real efficiencies in the marketing organization, in terms of one product roadmap, getting the efficiencies out of one platform like (inaudible) making sure that we are leveraging all the capabilities across all the sub-segments within the business, in terms of enterprise, SMB. And so that’s been very beneficial. And then geographically getting aligned so that there is a better coordination and there's never enough feet on the street. So it’s actually better utilization of the sales organization. Really encouraged, I think the team is really encouraged and we are looking forward to the second quarter.

Okay. Any margin impact or anything we should expect going forward, or just more incremental blocking and tackling smaller steps?

Right now, it is just incremental blocking and tackling.

Okay. Great. Thank you.

And we will take it from there.

Thank you. Our next question comes from John Mark Warren from Morgan Stanley.

Hi, there. I was just wondering if could comment on any changes you have seen from your business customers in terms of economic outlook or decisions cycles, and then also if you are seeing or foresee any impacts from sequestration in our government business?

Yeah. We think the economy is pretty fragile still. However, in the business side, we are seeing still strong demand for business service, IT services. We had mixed signals. We have the housing starts improving. At the same time, you get the sequestration as you mentioned. We got the higher taxes from the first of the year, so it’s really a mixed bag in what we are seeing here. But bottom line, we think we are going to see consumer demand be weak, investing full forecast we agree with that. We don’t see government demand weak. So we see our own growth coming from the business sectors in our view. We were seeing demand there. We were seeing a longer cycle times as well in the business sector. So it’s not totally negative but we are not seeing the growth by any means there that we hope to see maybe in the second half of the year. Karen will add to that.

Yeah. I would. Two adds there. In terms of just what the different business, strengths right now in business solution really is around MPLS, Ethernet bandwidth. And so we’ve been very successful in getting large MPLS type of customer. What’s important for these large customers to have diversity of course and as they are looking around at other carrier or letting change their position extremely well and winning or loss goes on in that particular segment, saying that relative to the economy and such. I would say that actually there is a bright spot here because businesses, at least lot of the businesses that spoke until recently are looking for ways to do things differently. And so they really are a very serious to that, looking at that ousourcing and taking their IT and outsourcing at or even some of the network sources and getting that sourced. I have been in conversations with very different, even that it was six or eight months ago because I believe businesses have to do things differently. And they see this as one opportunity for us. So we are pretty encouraged with that.

Thank you. Our next question comes from [David Fritz] from Citigroup.

Thank you. Just following up on the stock repurchasing conversation. Would you consider using your revolver to repurchase stock with normal cash?

David, I mean we’ve really primarily used free cash flow during the first quarter. We don’t have anything drawn on our revolver now. We will consider using the revolver to a certain extent. But again it’s going to be used in for opportunistic purchases. We did commit to the agencies and just from to ourselves from a liquidity standpoint that since we are non-investment grade now at least at the parent company, we are going to keep a $1 billion free on the $2 billion revolver just from the liquidity standpoint.

Okay. Fair enough. And then just data point update, did you get any dividends from your subsidiaries Embarq or QCI score?

We did pay dividends. We did pay quarterly dividends from ourselves up to the parent company, yeah from Embarq and QC.

Okay. And then finally, when would you expect to release the financials for Embarq this quarter?

Actually, we adjust our website. Yeah. They are password protected and only those to bond investors that own the bonds in Embarq. So they are not really broadly distributed. The QC 10-Q that will be filed prior to the due date, probably on Monday.

Okay. All right. Thank you.

And our next question comes from Michael Adele from Morningstar.

Just really quickly on nice step-up in DSO broadband, in the first half last year, just curious if you could give any more color on (inaudible) and any additional details you can provide on what type of speed customers you are taking on that value chain would be helpful too.

Mike, we missed a part of your questions, you got gargled, would you repeat the question please?

Sure, on the DSO I asked, just in terms of the competitive environment, any changes in there for the past quarter or so and then what type of speeds you see your customers take on average?

I got the speed question, I am not sure the first question. On the speed, we are seeing speed probably in the 10, 12 meg category. So we do see customers wanting to take higher speed. And the first question was around the competitive environment, in general it is competitive environment, and continuing to be in competitive environment. And we continue to execute very well and we will continue to be competitive.

Our next question comes from Stanley Martinez from Legal & General. Stanley Martinez - Legal & General: Curious, in the bond issuance that you conducted in March, you did that at the senior unsecured and just wondering was that expeditiously in order to access term capital relatively quickly to pay down the revolver or as you proceed to share buyback end you potentially draw on the facility more in Q2 and have to, would you seek to use some of your capacity at the Holdco at the senior secured, rather than senior unsecured, potentially to issue notes which are callable to provide yourself with more optionality and maybe reduce our interest cost further?

Yeah, Stanley, at this point, first of all we did just the $1 billion issuance and we’re really going for $500 million and had so much demand and the rate was so good, we decided to take $1 billion. But we basically used that to repay the credit facility as well as we had a maturity coming up about that time of that company, so we paid debt off as well. In terms of using senior secured debt, we’ve not discussed that at this point. I think as long as the unsecured markets are where they are. We will continue to use the unsecured markets in the parent company. Stanley Martinez - Legal & General: What about in terms of adding some more interest rate optionality to the debt portfolio in terms of callables versus the normal term loans that you do now, might that be an additional way to try to optimize things as you put into the high yield entity?

We will look at it Stanley as it comes along and as we look at each potential issuance that we can get a significantly better rate and get some optionality. At this point we are basically -- first issuance we did was really almost just like we were an investment grade issuer, really was not difference at all in terms of the execution and the demand and the rate for that ---

Our next question comes from Michael McCormack from Nomura Securities.

Could you say a comment regarding cable competition, I know Karen, you said you’re pretty happy with your speeds relative to other competitors. But are you seeing cable getting more aggressive and trying to attack you on speed and then on the small business side what you’re seeing from a cable perspective?

Yeah, in terms of what I said, I think the question was around -- we will remain competitive and that’s really around the execution, in terms of speaking of that, that is a challenge clearly. DOCSIS 3 continues to be a challenge, it has been. So it’s not a different challenge, it’s the same challenge but pretty well deployed. In terms of the cable into small business, they have been aggressive, they made margin estimate, they put feet on the street and they continue to progress in that particular area and we will continue to be very focus in the SMB and small business side of house also.

Okay. Karen, just on the high speed side, is there any thoughts internally to be accelerating trying to get fiber deeper, adjust those and be able to continue to rollout, we are seeing a lot more consumption in the home?

And I would say that our history shows that I think relative to the type of company, we are -- we have to have different toolboxes, depending on the density and the demographics. So we focus not only density but we try to use our capital in a very targeted away and going where we have the higher demographics to provide the GPON type services, if that continues to work for us. Omaha definitely is the trial. They had a whole lot of fiber in the particular footprint from the fire video service that was there. And so this gives us a chance in a very economical way to go in and look at, what are the propensity to buy, what are the churn rates, what are the fee take rates, what’s the best kind of market, so really excited about that. On a greenfield basis, we always try to put fiber in. And then as long as we can kind of continue to push fiber in, when we have the opportunity we will. But again, fiber doesn’t know it’s incredibly important and so we got different technologies depending on the profile of the network and the customers segment we are going after.

Great. Thank you.

Thank you. And our final question for today comes from Phil Cusick from J.P. Morgan.

Hey, guys. Thanks. Can you talk a little bit more about the Prism TV efforts? In Phoenix, you said that there was a good start there. Can talk more about the one gig efforts in Omaha and the pending soft launch, should we expect a higher general OpEx, both from the Omaha efforts and the soft launch or is that sort of baked into the guidance at this point and figured you could get through it?

It’s definitely baked into the guidance. And we’ve taken a lot of cost out of business, as we continue to bring Prism in. So we’ve done a pretty good job of balancing that. In terms of Phoenix and Prism, we are into soft launch, incredible encouraged by the results, not only from the customers take rate but frankly from the execution of the operational teams. And really it's one of the best soft launches that we have but you get key learnings along the way. In terms of Omaha, a couple of things. The reason we are there because there was a video product that Qwest had there prior. The franchise agreement was up. We had some decisions to make. We looked at that footprint which is a nice, dense area and it was just left with lots of fiber running right by the home and so that give us a rich opportunity to really try out GPON in a bigger way. And so again, the reasons for that is to really test the technology to take rates in a go to market and take the learning and then make decisions from there.

I might just add to that, Phil. If you look at the rest of the year and you look at the expenses that have been increasing as we mentioned -- Stewart mentioned earlier, lot of expense -- lot of the issues driving expenses or the factors driving expenses is our investments in the new service like Prism, our Data Hosting expansion, our broadband expansion where we have business cases that are going to drive revenues or are tied to revenue, even including our fiber to the tower works. Lot of our CapEx as well as our OpEx the rest of the year are tied to growth efforts. So we are pleased with our ability to really contain our expenses or focus our expense, our investments as we like to tell them all, all these out there, we expect revenue growth to occur over the next couple of years.

And if I may, one more quick one. I apologize if you talked about this in your prepared remarks but you talked about one-time expense reductions your experienced during the first quarter. Can you just detail for this for us a little bit?

Yeah. Phil, we had some probably about $20 million of one-time items that were expense reductions and really some timing items as well in the first quarter that weren’t spent, that will be spent later in the year, such as our branding campaign, that got started a little bit late. And so some of the expenses that we expected in the first quarter get pushed out in the second quarter. So just a few items like that, a few items from the standpoint of either one-time credits that we had in the quarter, expenses related to tax settlements, things like that.

A large access settlement.

Even we had an access settlement as well.

Got it. Thank you.

Thank you. I’m showing no further question at this time. I’d like to turn the conference back over to Mr. Glen Post for any closing remarks.

Thank you, Saeed. We are pleased with the solid results which we achieved in the first quarter. Customer diversification and product portfolio expansion in recent years has positioned us well to grow our strategic revenues from our mix of small and large enterprise customers. We also believe our strategic product portfolio positions us to differentiate our cloud and managed services offerings through the bundling of both network and cloud services, the expansion of our Prism TV service from the recent launch of savvisdirect, our managed hosting cloud services platform for small and medium business customers further strengthens our product portfolio and should provide us additional revenue growth opportunities in 2013 and beyond. And finally, I’m pleased with the strong progress we made on the share buyback program over the past three months. And we look forward to the opportunities through the remainder of this year presents. Thank you for joining our call today and we look forward to speaking with you in the weeks ahead.

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