Investing.com - CenturyLink fell sharply Monday after the telecom company pushed back the filing of its annual report, blaming "material weaknesses" in its internal controls related to its Level 3 Communications acquisition.
The company said it does not expect to report any material changes to its 2018 financial results that were previously reported on Feb. 13, but needs to carry out further evaluation of its internal controls over both its revenue recording procedures and for measuring the fair value of Level 3's assets and liabilities.
Shares fell 9.5%.
The downbeat day for CenturyLink (NYSE:CTL) adds to losses sustained following the release of mixed fourth-quarter results in February. The company beat on earnings, but revenue missed estimates from Investing.com as its legacy consumer business, which accounts for about a fifth of total revenues, continued to weigh. CenturyLink also slashed its dividend.
"While we see the dividend cut as necessary, the announcement came much sooner than expected given management's assurances on the prior earnings call," CFRA, an independent research provider, said following the dividend cut.
CenturyLink acquired Level 3 in Nov. 2017 for $34 billion to expand its reach in the business communications market and compete against AT&T (NYSE:T) and Verizon (NYSE:VZ). But synergies from the acquisition have been slow to take shape.
This was not unexpected, with CenturyLink highlighting, at time of completing the acquisition, a number of risks that could delay the anticipated benefits from the tie-up, including higher-than-expected costs to integrate Level 3, rising competition and lower demand for CenturyLink's legacy offerings.