Wireless Not in the Cards for CenturyLink, Qwest

Bigger is certainly better for CenturyLink Inc. (NYSE: CTL) as it combats the landline decline with its planned acquisition of Qwest Communications International Inc. (NYSE: Q), but enhancing a waning business might not be enough to compete in an increasingly wireless world. (See Qwest, CenturyLink Plan $22.4B Marriage and The Final Qwest?)

For CenturyLink, expanding into wireless services is a tricky proposition. The newly national operator would have a nationwide data and voice network at its disposal, but, with only 850,000 mobile subscribers post-acquisition, it won’t have a nationwide wireless business to offset any losses in landline.

In 2002, rather than be acquired in a hostile takeover by Alltel Corp. (NYSE: AT), CenturyLink sold its wireless business to the carrier, now a part of Verizon Wireless . Qwest resells Verizon Wireless service, but CenturyLink President and CEO Glen Post was vague about whether that deal would continue.

"We're going to continue to see customers migrate to wireless," Post told the Financial Times. "The future of our company is really in data. The wireless services in our areas rely on the wireline backbone, and we're expanding our reach."

CenturyLink will have to continue to rely on the wireline backbone, as voice-over-IP isn’t an option for much of its rural demographic, where broadband access is sparse. The only real option it has is to acquire spectrum and build its own 3G or, more likely, 4G wireless network. But that comes with a most likely cost-prohibitive price tag.

CenturyLink may not be exploring wireless at all, according to Christopher King of Stifel, Nicolaus & Co. Inc. He told The Wall Street Journal that it wouldn't make sense "for a new entrant to enter the U.S. wireless market." Landline would have to remain the core focus for as long as that market can grasp at relevance.

"We are not going to go out and buy shirt factories," Post told analysts on Thursday’s conference call. "We are going to be in the communications business."

— Sarah Reedy, Senior Reporter, Light Reading Mobile