Monday, October 27, 2008

CenturyTel Buying Embarq

In an all stock deal valued at somewhere $11.6B, CenturyTel is buying the larger Embarq. ($5.8B in stock and $5.8B of Embarq's debt.) Embarq has been up for sale for the last six months with no takers. Now in this economic tsunami, C-Tel pulls an all-stock merger. Interesting.

We have been watching for a merger among the independent ILEC's - Windstream, Embarq, and CenturyTel. Other Indies have been merging - like Hargary and Smart City. Just no one predicted this one. The bet was on Embarq and Windstream to merge. But then no one saw the Fairpoint/VZ deal coming either.

C-Tel's third-quarter sales slipped about 8% to $650 million from $708.8 million, but Embarq does $1B quarterly. ("The telecom technology company said revenue fell to $1.53 billion from $1.59 billion in the year-ago period.") [marketwatch article]

"The combined company would have about 8 million lines spanning 33 states, mainly in rural areas, " according to the AP. Rural means less density and less ability to push FTTx and broadband. Without a cellular component, these incumbents face a downhill slide in revenue. (They are in the EarthLink boat sort of).

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