Surprise, Surprise: No Offers for Qwest Longhaul Yet

The Denver Post is reporting that there are as yet ‘no public offers’ for the longhaul network of q, which was reported to be for sale last month.  Now, it is rather unclear why anyone would expect a ‘public offer’ for a unit that has never ‘publicly’ been for sale – but then it seems there is rarely an actual for-sale sign on an asset anymore since nobody wants to be seen as needing to sell.  Nevertheless it isn’t terribly surprising that finding a buyer would be difficult for Qwest’s national fiber footprint and extra conduits. 

To put it simply, those who could buy it don’t want it badly enough, and the people who do want it badly enough can’t afford it.  Anyone with the means to buy Qwest longhaul (Verizon, AT&T, foreign incumbent) is already too big and would need to convince the FCC, DOJ, and perhaps the DOD (in the case of a foreign incumbent) and this takes political capital that they might not really want to spend, certainly not after paying such a high price tag in the first place.  Their interest would be opportunistic, and at $2-3B Qwest longhaul is not priced for bargain hunters.  Anyone else (Level 3, Global Crossing, TW Telecom) lacks the means in the current financial climate – by an order of magnitude, and in most cases would have better places to put the money if they did have the means.

But Qwest already knows all this too, and the price tag has always been just way too high for this environment.  Just ask Tiscali, which had to sell and got a pittance.  It doesn’t appear Qwest needs to sell right this moment, so why bother floating this idea in the media?  I think that after watching this play out, we can see it clearly as a trial balloon.  Perhaps they do plan to sell it down the road, and by floating the idea now it will be easier to kickstart when the credit markets loosen up.

I disagree with the suggestion made by some that Qwest wouldn’t want to sell the longhaul network they use to serve their growing enterprise business outside their ILEC territory.  On the contrary, they have been playing up that business because it is probably part of the package they are trying to sell – without it I can’t get a valuation anywhere near that $2-3B.  Besides, any sale of Qwest longhaul is likely a prelude to a sale of the rest anyway – whether whole or in pieces.  It’s just that the time is not yet here for any of this to actually happen.  Maybe next year.

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Categories: Internet Backbones · Mergers and Acquisitions