CenturyTel Embarqs on More Consolidation

Carrier consolidation continues today as CenturyLink Inc. (NYSE: CTL) announced it will buy Embarq Corp. (NYSE: EQ) in a stock-for-stock transaction valued at more than $5 billion. (See CenturyTel Buys Embarq.)

The companies announced that CenturyTel would give up 1.37 shares of its stock for each Embarq share, giving Embarq shareholders a 36 percent premium over Friday’s closing price for Embarq’s stock. When (and if) the deal closes, Embarq shareholders are expected to own approximately 66 percent of the combined company; CenturyTel shareholders will own the rest.

The merger will form a sprawling telecom company with about 8 million access lines and 2 million broadband customers spread out over 33 states. The companies say their pro forma revenues will be more than $8.8 billion a year based on their best guess for the 12 months ended September 30, 2008.

Make no mistake: This isn't a growth story. Putting Embarq and CenturyTel together won’t create a next-gen access network powerhouse or a wireless technologies leader. The growth will have to come from somewhere else as these two combined only make for a bigger phone company that continues to lose access lines as its customers embrace VOIP, cable, and wireless options.

Indeed, CenturyTel is losing access lines at a mid-single-digit percentage rate per quarter, and Embarq lost 170,000 voice lines in the second quarter alone. And, while both companies continue to add broadband subscribers at a quick clip, their copper-based access networks won’t be any match for the speeds coming soon from their cable competitors and some advanced wireless options.

What the merger will do is make two large companies somewhat smaller and more efficient, while raising the stakes for any equipment suppliers the new company may pick in the future. The companies say the combined phone company will save $400 million annually within the first three years of operation by cutting jobs, finding operational efficiencies, and coming up with some "enhanced revenue opportunities."

Wait a minute. "Enhanced revenue opportunities"? That can only mean one thing: More eGos! (See Embarq Readies Its 'Fourth Screen'.)

— Phil Harvey, Editor, Light Reading
gbmorrison 12/5/2012 | 3:28:46 PM
re: CenturyTel Embarqs on More Consolidation 10 points for the 1st person to correctly list -- in chronological order -- all of the companies that resulted from the 1984 break up of AT&T. Embarq has to rank pretty high among the ones that existed for the SHORTEST time.
paolo.franzoi 12/5/2012 | 3:28:46 PM
re: CenturyTel Embarqs on More Consolidation
Ummm...Embarq did not result from the breakup of AT&T.

It was formerly Sprint Local - much of which came from United Telecom and Centel.


So, perhaps you should bone up?

gbmorrison 12/5/2012 | 3:28:43 PM
re: CenturyTel Embarqs on More Consolidation I was confusing "Idearc" and "Embarq." The name was so short lived in didn't stick with me.
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