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Qwest shops its LD network again (with local attached)


Ed Gubbins

Jan 6, 2010

 “We’re agnostic about being a buyer or a seller,” said Ed Mueller, CEO of Qwest Communications, at an investor conference yesterday, though he sounded much more like a seller as he continued. “We do bring a nice long-distance network,” he pointed out, adding that those particular assets “absolutely” become more valuable as the need for more wireless backhaul capacity increases. Qwest already has signed contracts to string fiber to 2000 of its 17,000 cell cites and expects revenue from these five-to-10-year deals to start showing up later this year and escalate in 2011.

A year ago, when Qwest (NYSE:Q) was said to be shopping that long-distance network around, some analysts said the company could use the resulting funds to roll up other rural telcos. It never shed those assets, though (some said the asking price was too high). And more recently, analysts have imagined Qwest as the one being acquired, even by much smaller companies like CenturyLink (NYSE:CTL) or Windstream (NASDAQ:WIN).

Back in the fall of 2008, CenturyLink’s (then CenturyTel’s) CEO Glen Post said he’d be hungry for more M&A not long after closing his company’s acquisition of much-larger Embarq, which closed last July. “I think within a year or so we’d be ready to look at the possibility of other acquisition opportunities,” Post said then, which implies that he could be looking for deals this spring or summer and is no stranger to buying companies bigger than his own.

If CenturyLink was looking to buy Qwest, this year might be a good time, while other potential bidders are still busy integrating their own recent purchases (Frontier Communications’ of Verizon’s lines, Windstream’s acquisition of Iowa Telecom and others). Most of the big names are going to be busy in the near term integrating the assets they just bought.

“RLEC M&A will likely take a breather [in 2010],” Stifel Nicolaus analysts said in a research note this week. With most of the larger rural assets already scooped up, they added, “it is becoming more difficult for equity investors to make M&A a significant part of an RLEC investment thesis going forward.”

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