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A Qwest/VZ Marriage?

12:45 PM -- 24/7 Wall Street has a list out for you 1930s nostalgia buffs. With the economy heading for a recession, it names 10 companies most likely to be swallowed up this year and who their likely buyers would be. No. 2 on the list is Qwest Communications International Inc. (NYSE: Q) with its likely buyer being Verizon Communications Inc. (NYSE: VZ)

    Verizon (NYSE: VZ) is probably the most logical buyer for Qwest. The deal would give the New York-based company a huge pool of customers for cross-selling cellular with land-line products. If the Verizon fiber-to-the-home project continues to be successful, it might move the build-out into the Qwest service area to compete with cable and satellite there. Verizon has a market cap of $105 billion. Qwest's is $8.5 billion. The savings in putting the two together could be significant.


On the surface that all seems to makes sense, but let's consider why Qwest is not in the video business in the first place. True, it doesn't have the financial resources that Verizon does, but it also has admittedly said it doesn't have the scale in its footprint to justify such an investment. Would Verizon really look at Qwest's mostly rural footprint and see an opportunity to grow FiOS even further? Doesn't seem likely.

The more compelling part of that argument is the wireless opportunities. But in that aspect, many of Qwest's wireline customers get their wireless services through Sprint Corp. (NYSE: S). So wouldn't it just make a lot more sense for Verizon to buy Sprint? Sprint already runs on CDMA and already has the relationship with Qwest, and Verizon could get access to that customer pool without taking on Qwest's $14 billion in debt. Of course Sprint would be a much more costly acquisition. What would you do?

— Raymond McConville, Reporter, Light Reading

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