In big M&A news today, CenturyLink (NYSE:CTL, news, filings) and q have announced their plans to merge. There have been lots of rumors crossing my desk lately, but I have to admit this wasn’t one of them. That doesn’t mean it’s surprising, it’s just the mother of all RLEC consolidation deals, with the Qwest longhaul network tagging along for the ride. So what will the combined company look like?
| Revenues | ~$19.8B |
| EBITDA | ~$8.2B |
| Cash | ~$2.5B |
| Debt | ~$21B |
| Broadband customers | ~5M |
| Access Lines | ~17M |
| Video Subscribers | ~1.4M |
| Wireless Subscribers | ~850K |
One question I am sure that I will be asked is just what will become of the Qwest longhaul network. In the short term it takes that asset off the market of course, since this deal will probably take a year to close. Beyond that, one could argue that the greater geographic spread of the combined company will benefit the longhaul network. CenturyLink itself has a regional fiber network in the Midwest which will no doubt be integrated with it, bringing improved on and off ramps. Hence, this deal probably reduces the possibility of a later divestment of classic Qwest in the long term. But it doesn’t eliminate it.
The transaction will be structured such that CenturyLink will buy Qwest in an all-stock deal which values Qwest at $22.4B or $6.02 per share as of the close of trading yesterday – a premium of just under 15%. Centurylink shareholders own 50.5% of the resulting company and Qwest shareholders own the other 49.5%. The two companies expect to realize some $625M in annual synergies after a few years of integration, $575M of those being from opex and $50M being from capex. To get there though they will have to spend $650-800M in extra opex and $150-200M in extra capex.
The new board and management will be made up of both CenturyLink and Qwest executives, with Glen Post taking over as CEO and Ed Mueller stepping back and taking a position on the board.
I’m sure more news will filter out about this deal as the day goes on.
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!
Categories: ILECs, PTTs · Mergers and Acquisitions
Join Our LinkedIn Group
i view this as a sad & “white flag” deal. qwest’s clear strategic need was wireless and biggest issue was declining wireline revenue and lines in service. so, in this deal, two declining wireline “boat anchors” are tied together to see if they now float? and, nothing is done to gain wireless or bulk up business markets, arguably Q’s other strategic need (leveral the LH network). this basically tells the entire industry that wireline is officially dead, not worth much and that it now trades on DCF because there is no growth and no hope
I think strategically it is excellent – this is a business that needs scale. There needs to be less buyers of LH assets then there are and Qwest was doing the right thing for shareholders despite what its Corp Dev departments might have secretely vied for.
Now Qwest hopefully puts their LH assets on the mkt again to simplify the strategic mission.
Does anyone have ideas on what CTL now needs to do regarding a wireless strategy? They offered contridictory message on the conference call in relation to Qwest reselling Verizon.
Does Sprint/Tmobile fit into this equation anywhere?
Do they have regrets selling their wireless business to AllTel and subseqently to Verizon at this point?
while wirelines are declining you cannot state tha tin rural areas…I know ISP’s in the rural areas that pay up to $3K a month for aa single T1 backhaul line…
you all need to think deeper here…do not foorget about the guvvie business Q has….
With windstream and now CTL going on the shopping spree I wonder if this forces TDS to go after Frontier or at least Fairpoint…