CenturyLink Inc. (NYSE: CTL) is to acquire Qwest Communications International Inc. (NYSE: Q) in a $22.4 billion all-share deal that will create a national US operator with annual revenues of about $20 billion. (See CenturyLink to Buy Qwest.)

The move comes less than a year after CenturyTel and Embarq merged to form CenturyLink. (See CenturyTel, Embarq Merge and CenturyTel + Embarq = CenturyLink.)

Qwest stockholders will receive 0.1664 CenturyLink shares for each Qwest share they own. Based on CenturyLink's share price of $36.20 when the markets ceased trading Wednesday, the deal values each Qwest share at $6.02 (a 15 percent premium on Wednesday's closing share price of $5.24), and the whole company at $22.4 billion (including Qwest's $11.8 billion net debt).

Once the transaction is complete, CenturyLink shareholders will own 50.5 percent of the merged company, while Qwest shareholders will own 49.5 percent.

In early pre-market trading Thursday, CenturyLink's share price dipped nearly 2 percent, to $35.50 each, while Qwest saw its stock leap by 8.8 percent, to $5.70. The two companies are holding a conference call to discuss the impending nuptials at 9:30 a.m. Eastern Time today.

Based on customer and operational data from the end of 2009, a combined CenturyLink/Qwest has a 173,000-mile fiber network, offers its services in 37 US states, and has 5 million broadband customers, 17 million access lines, 1.4 million video customers, and 850,000 mobile subscribers. (See Qwest Expands 40-Meg DSL in Colorado and Qwest Attacks Comcast With 40 Mbit/s.)

If the operators had been merged in 2009 (and including a full year of Embarq sales), they would have generated revenues of $19.8 billion and EBITDA (earnings before interest, tax, depreciation, and amortization) of $8.2 billion. The majority of the revenues would have come from Qwest, which reported full year 2009 revenues of $12.3 billion, down 8.6 percent from 2008.

The two carriers believe they can achieve annual operating cost savings of $575 million within three to five years of the deal's closure, which is expected in the first half of 2011.

"This combination will enhance our ability to deploy innovative IP products and high-bandwidth services to business customers, expand broadband availability and speed to consumers, and offer superior, differentiated video products," stated CenturyLink CEO Glen F. Post III in a prepared statement. Post is due to be the CEO of the combined company.

— Ray Le Maistre, International Managing Editor, Light Reading