Qwest to merge with CenturyLink

by Karl Bode, Broadband DSL Reports

It looks like Qwest has finally found their suitor. CenturyLink and Qwest announced this morning that CenturyLink will acquire Qwest in a tax-free, stock-for-stock transaction worth about $10.5 billion. The deal also includes CenturyLink taking on $11.8 billion in Qwest debt -- which Qwest had been busily trying to reduce for several years now in order to attract a buyer. The new, larger CenturyLink will offer service in 37 states, and the new combined business will serve approximately 5 million broadband customers, 17 million access lines, 1,415,000 video subscribers and 850,000 wireless consumers.

Rumors of a CenturyLink or Windstream purchase had bubbled up earlier this year. Qwest had been making it pretty clear for several years that they were looking to be acquired, but the company's price tag had been considered too high by most suitors. While some speculated on a Verizon acquisition, Qwest serves a significant number of rural markets -- the exact kind of markets Verizon has been trying to get away from.

Recent estimates had pegged Qwest's value at around $20 billion -- though if you'll recall, Qwest bought much of their current infrastructure from U S West back in 2000 for $45 billion. For several years, Qwest has been focusing on lightening their debt load to make an acquisition more likely -- and as a result has made only modest investments in network upgrades.

According to the announcement, Qwest shareholders will receive 0.1664 CenturyLink shares for each share of Qwest common stock they own at closing. Upon deal completion, CenturyLink shareholders will own roughly 50.5% of the new company, with Qwest shareholders owning 49.5%. Of course CenturyLink was created only just last year with the merger of CenturyTel and Embarq.

It seems likely that the merger's primary goal is to create a bigger, rural super-telco with a better shot at grabbing USF and broadband stimulus funds. Still, this doesn't magically create a wireless division, and both companies have a lot of outdated last-mile copper that needs upgrading.

article originally published at Broadband DSL Reports.

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