CenturyLink sinks other wireline carriers

SAN FRANCISCO (MarketWatch) � A sharp selloff hit a group of wireline telecommunications carriers on Thursday after sector leader CenturyLink shed nearly one-quarter of its market value.

/quotes/zigman/203112/quotes/nls/ctl CTL 32.38, -9.31, -22.32% CenturyLink Inc.

The sharp drop on CenturyLink CTL came after the telecommunications carrier slashed its dividend and admitted that its debt would likely lose investment-grade status. The stock plunged more than 22% to $32.47 by midday, setting its lowest level in nearly 18 months.

The move brought down peer stocks like Windstream Corp. WIN , which fell nearly 8%; Frontier Communications Corp. FTR , which fell nearly 7%; and Consolidated Communications Holdings CNSL , which was last trading down nearly 4%.

Citigroup telecommunications analyst Michael Rollins wrote in a note to clients that all four companies �are each dealing to varying degrees with the secular erosion of high-margin legacy revenue, the slower rebound in the enterprise sales cycle, and the investment requirements to enhance broadband performance and deploy fiber connectivity to towers.�

He cut his rating on CenturyLink to neutral and downgraded Frontier to a sell. He maintained neutral views on Windstream and Consolidated.

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Several other brokers downgraded CenturyLink, following the company�s fourth-quarter results on Wednesday afternoon, when it made the disclosures about its dividend and debt rating. The company said the dividend move was made as part of an effort to invest in its business �from a position of strength. Read: CenturyLink shares tumble after cutting dividend.

CenturyLink was downgraded by J.P. Morgan, Nomura, Raymond James and Macquarie, in addition to Citigroup.

�While we believe the revised plan gives the company more flexibility to improve the fundamentals of the business in the near to medium term, we believe there is limited upside for the stock,� Philip Cusick of J.P. Morgan wrote.