Qwest, CenturyTel announce $10.5 billion merger
Both CenturyTel and Qwest are latecomers to the wireless party. Now, they want to merge in a $10.5 billion deal.
By Leslie Brooks Suzukamo
April 22, 2010
The proposed deal, which needs federal and some state regulatory
approval, would combine Qwest, the nation's third-largest phone
ATT and Verizon Communications, the nation's top two telecommunications providers, would still dwarf the combined company, however. And it still would face an uncertain future. Unlike ATT and Verizon, neither Qwest nor CenturyTel owns wireless services, which offset a steady loss of landline customers by all phone companies.
Nor does either Qwest or CenturyTel have fiber optic networks as extensive as ones recently developed by the top two phone companies. ATT and Verizon are trying to use superfast broadband to deliver TV video that competes with cable companies like Comcast, while Qwest and CenturyTel resell satellite TV services.
"You've got two slowly dying companies," said Donna Jaegers, a Denver-based telecom analyst at D.A. Davidson Institutional Research. "You put them together — do you get a bigger slowly dying company? That's what investors are grappling with," she said.
The deal is not expected to close until the first half of next year.
In the meantime, Qwest customers in
CenturyTel CEO Glen Post III said his company hasn't decided which name would be used after the acquisition but he's leaning toward "CenturyLink" for the consumer side and "Qwest" when selling to businesses. CenturyTel adopted the CenturyLink brand after its $5.8 billion acquisition last year of Embarq, the spinoff phone line business from Sprint.
Post said the combination of CenturyLink and Qwest will give the company scale and scope, and he hinted it could lead to innovations like TV over broadband and other fast Internet services with which both companies have experimented. But he offered no specific promises.
The all-stock deal could double CenturyTel's revenue to nearly $20 billion and give its shareholders a 50.5 percent interest in the combined entity, with the balance going to Qwest shareholders. Under the deal, Qwest stockholders get 0.1664 CenturyTel shares for each share of Qwest common stock they own at the closing. Based on the closing price of CenturyTel stock on Wednesday, the day before the deal was announced, Qwest shareholders would get $6.02, a premium of about 15 percent over that day's closing price. The final value of the deal would depend on the stock prices for both companies at closing. Qwest stock on Thursday closed at $5.37, up 13 cents. CenturyTel's stock fell $1.19 to $35.01.
The combined companies' headquarters would be in
CenturyLink has about 150 employees in
The Communications Workers of America, the largest union in the telecommunications industry, said it "looks forward to serious discussions" with Qwest and CenturyTel. CWA Minnesota State Council President Tim Lovaasen said the sale of Qwest was not a big surprise to his fellow union members. Like others in the telecom world, he has heard the rumors for years that it would be sold or have to buy other companies to survive.
A decade ago, Qwest was a darling of Wall Street, an upstart broadband company led by brash CEO Joe Nacchio that took over the former U.S. West phone company and promised to shake off its dust and remake it as a broadband company. The deal and accounting shenanigans left Qwest with a heavy debt to this day, however. Nacchio, 60, was subsequently convicted of insider trading and is serving a six-year sentence in federal prison.
"Hopefully, these guys are telephone guys," Lovaasen said of CenturyTel. "Not like those guys who took over U.S. West."
Associated Press reports were used in this story. Leslie Brooks Suzukamo can be reached at 651-228-5475