Cable Technology Feature Article
Qwest-CenturyLink Deal: And Then There Were Two
By Paula Bernier, Executive Editor, IP Communications Magazines
In my day there were seven RBOCs. That's right, seven.
That was not so many that you couldn't keep track of them, but just enough that you could make a game out of remembering them. OK, close your eyes and give it a shot.
In case your memory failed you, here's the list:
- Bell Atlantic
- BellSouth (News - Alert)
- Pacific Telesis
- Southwestern Bell (SBC)
- U S West
Of course, Pacific Telesis and Ameritech eventually got swallowed up by SBC, which a few years later made a game-changing move by acquiring AT&T (News - Alert). After expending a reasonable amount of effort to push the SBC name, the company decided instead to keep the widely known and valued AT&T brand, and the name stuck. The new AT&T then went on to buy BellSouth, which many had flirted with up to that point.
Meanwhile, Bell Atlantic bought NYNEX and GTE and then changed its name to Verizon. To match SBC's AT&T move, Verizon also brought MCI into the fold.
Despite this last merger, however, folks have pretty much been wondering about Qwest ever since.
Although the deal made it larger, the company remained a bit of an odd bird considering its significant financial challenges early on, its size compared to the other remodeled Bells, its far-flung and partially rural footprint, and its lack of both a cellular network and significant telco TV initiative. That said, we've all quietly wondered, what will become of this one?
Today we got our answer, sort of, when CenturyLink announced plans to take the hand of Qwest in a stock deal worth $10.6 billion. The companies' believe the deal, which is expected to close early next year, will generate annual operating and capital synergies of approximately $625 million over a three- to five-year period.
Qwest is the nation's third-largest telephone company. CenturyLink is No. 5. As of Dec. 31, 2009, CenturyLink and Qwest served local markets in 37 states with approximately 5 million broadband customers, 17 million access lines, 1,415,000 video subscribers and 850,000 wireless consumers.
'We believe the combination of CenturyLink's and Qwest's employees, assets and service areas will provide us greater scale, scope and expertise and will provide significant benefits for shareholders, customers and our communities,' says CenturyLink President and CEO Glen F. Post III, who will remain at the helm of the company following the close of the Qwest deal. '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.
'The combined company's highly recognized national network will significantly expand our ability to deliver strategic and customized product and service solutions to our business, wholesale and government customers throughout the country. In addition, we will still maintain the focus on our local markets through our effective regional operating model and targeted marketing strategies. We believe shareholders will benefit through their investment in a company that has greater financial resources and flexibility, including a more diversified revenue base and an enhanced competitive position.'
As TMCnet contributor Gary Kim notes, the merger creates a new independent telco of very-large scale, with 2009 revenues of nearly $20 billion.
'In some ways, the merger also recreates a Sprint (News - Alert)-style company with both local telephone assets and a major long-distance network,' writes Kim. 'Likewise, the merger puts the new CenturyLink into a new market space as a provider of services directly to enterprise and trans-national customers for the first time.'
However, some pundits view the deal as a way for CenturyLink to better respond to the cableco threat on the landline voice services side, although that is becoming an area of less and less focus for the telcos due to the long-standing trend of wireline replacement.
While the specific strategy behind this combination is not necessarily clear, perhaps the story is not over. As Kim points out, CenturyLink remains in a good position to make addition purchases.
What ever happened to that nice little company called Sprint?
Edited by Michael Dinan