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CenturyLink's Rise to Tier 1

12:00 PM -- With the news that the Federal Communications Commission (FCC) has approved its acquisition of Savvis (Nasdaq: SVVS), CenturyLink Inc. (NYSE: CTL) is poised to join Tier 1 status alongside Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) (albeit for wireline only). The rise from lowly old CenturyTel to Tier 1 status has happened rather quickly.

The quest began just three short years ago when, in October 2008, CenturyTel first announced its US$11.6 billion (including $5.8 billion in debt) purchase of Embarq. At the time, I assumed CenturyTel was laying the path for what I characterized as the rise of "super rural carriers," where Tier 2 telcos were beefing up with rural assets, pursuing a "bigger is always better" strategy. FairPoint Communications Inc. , Frontier Communications Corp. (NYSE: FTR), and Windstream Communications Inc. (Nasdaq: WIN) began following a similar path with acquisitions of their own. Clearly, CenturyTel had more ambitious plans.

What followed was the Qwest Communications International Inc. (NYSE: Q) acquisition for $22.4 billion (including $11.8 billion in debt), providing CenturyLink with a legitimate Tier 1 fiber backbone. At the time of the merger’s announcement, a combined CenturyLink-Qwest served 37 states with approximately 5 million broadband customers, 17 million access lines, 1,415,000 video subscribers, 850,000 wireless consumers and a 190,000 route mile fiber network.

Closing the Savvis acquisition catapults CenturyLink into legitimate Tier 1 status. A combined CenturyLink-Savvis will operate 48 data centers across North America, Europe and Asia with more than 1.9 million square feet of gross floor space, will have a national 207,000 route mile fiber network, and 190,000 route miles outside of the U.S. CenturyLink will employ 50,000 people, at least for now.

Certainly a junior Tier 1 to their AT&T and Verizon brethren, but a Tier 1 nonetheless.

— Bernardin Arnason, Managing Partner, Pivot Group , and Publisher, Telecompetitor

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