CenturyLink, Inc. (CTL), VimpelCom Ltd (ADR) (VIP), Oi SA (ADR) (OIBR): The Message Is Not Important, Yields Are

As distances shorten and cables grow longer, the size of the message is ever less an issue. Holding longer conversations on the phone became worldwide reality. Communications companies CenturyLink, Inc. (NYSE:CTL), VimpelCom Ltd (ADR) (NYSE:VIP), and Oi SA (ADR) (NYSE:OIBR) found success in their domestic markets and have looked at the international arena for more.

Communications Int’l Stock #1

CenturyLink, Inc. (NYSE:CTL)

Around February, 2013, CenturyLink, Inc. (NYSE:CTL) cut dividends for the first time in 40 years in order to free cash for a future buyback. Hence, after a rampant acquisition spree, the stock price plummeted with the announcement. Management then settled differences with shareholders at a fair price, and business continues to be profitable for both.

In the future, CenturyLink, Inc. (NYSE:CTL) will be looking to recover revenue due to inefficiencies associated with acquisitions integration. For the same reason, there are plans to build another 4,000 fiber towers and start an effective advertising strategy to drive demand and revenue. Additionally, acquisitions have been successfully integrated into the model, improving the product portfolio and increasing international presence.

Financially, CenturyLink, Inc. (NYSE:CTL) has a strong balance sheet. The last decade left a stable debt-to-cash ratio and revenues and free cash increased. On another note, the operating margin has decreased, remaining 4 points above the industry average (11.7). Nevertheless, it is expected to improve as acquisitions and capital invested become fully operational.

Currently trading at 25.1 times its earnings, just above industry average (22.3), the stock is fairly priced. CenturyLink, Inc. (NYSE:CTL) is made attractive by a 7.20% yield and the fact it is trading close to its 52-week low of $32.05. I recommend it as a long-term investment because the company holds a remarkable market position.

Communications Int’l Stock #2

With operations in all continents, VimpelCom Ltd (ADR) (NYSE:VIP) has shown remarkable growth in revenue after the Great Recession. A proven business model allows for international expansion and a strong operating margin. The firm built a strong base in Russia and has subsequently moved into adjacent and then global markets.

Any short-term goal for VimpelCom Ltd (ADR) (NYSE:VIP) is part of a greater strategy that began in 2007 with the acquisition of Golden, today Russia’s largest broadband provider. VimpelCom’s entrance to the Ukrainian mobile market gave the company a regional profile in 2010. But, Wind’s acquisition in 2011 took the company to sixth place among world mobile operators. So, management’s attention has recently been directed to successfully integrating acquisitions.

The balance sheet for VimpelCom Ltd (ADR) (NYSE:VIP) is almost perfect. High debt levels associated with the latest acquisition have caught investors’ attention too. The good news is that a steady revenue and cash flow trend, coupled with a stabilizing operating margin 7 points above the industry average, relieves any debt worries. However, the Algerian issue may shortly disrupt the business model.

Trading at 7.4 times its earnings, a 72% discount to the industry average, the stock is undervalued. Also, a 10.22% yield makes VimpelCom Ltd (ADR) (NYSE:VIP) pure gold powder. However, management infighting and the Algerian issue make the firm not suitable for long-term investment at the time. I recommend holding off until the Algerian issue is resolved.