Wednesday, September 05, 2012

Mergers Don't Work

There is plenty of evidence that most mergers don't work. Remember AOL-TW? Do you think that ATT buying up all the RBOC's created a better company? Or PAETEC scooping up Quagga, Xeta, Allworx, CavTel, MacLeod? Nope. Synergies are just on paper. Here's some proof from C-Link.

"CenturyLink Inc.'s (CTL) second-quarter earnings (2Q2012) fell 36% amid early-debt extinguishment and weaker margins, though the telecom company's revenue was boosted by an acquisition," writes the WSJ. "Revenue increased 4.7% to $4.61 billion, mostly as its Savvis acquisition added $278 million, as well as growth in demand for digital services."

What amazes me is that these giants keep getting bigger and the only metric growing is debt.

It is going to take some big CAPEX to beef up cloud, data center, EoC, broadband and TV services for CLT. How do they focus on that when CAPEX will affect their financials, that are tied to their debt?

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