Here’s the scoop from the Associated Press…
CenturyTel Inc., the country’s fifth-largest local-phone company, said Thursday that it will buy Qwest Communications International Inc., the third-largest, in a stock swap worth $10.6 billion to gain the benefits of scale in a shrinking business.
The combination would have about 18 million phone lines serving customers in 37 states, but would still be dwarfed by AT&T Inc. and Verizon Communications Inc. It would be based at CenturyTel’s headquarters in Monroe, La., rather than in Denver, where Qwest is based.
The article says it wouldn’t be great for job count, though apparently, “The Communications Workers of America, the largest union in the telecommunications industry, said it “looks forward to serious discussions” with both companies.”
It might be good for broadband…
But they hope the acquisition can make their combined company more competitive as a provider of telecommunications services to businesses and expand the reach of their broadband Internet service for consumers.
The Wall Street Journal has already chimed in with an opinion on “Why CenutryTel Finally Pulled the Trigger on Qwest”. The answer seens to be bigger is better, synergies are better, limited federal tax payments are better. They also indicate that more consolidation may be to follow.
GigaOm also jumps in with an opinion that focuses more on the impact on broadband and other services to rural areas.
The demand for wireline telephone and DSL services is on the wane, but at the same time, the need to spend money to maintain old lines and invest in new technologies like fiber is on the rise. … Adding to this grim mix is the coming reform of the Universal Service Fund, a government subsidy program aimed at offsetting the costs of providing rural telephone service. The program is being shifted away from telephone subsidies and toward paying for broadband expansions. The Federal Communications Commission is also trying to rein in some of the waste associated with the program. Within five years the FCC hopes to stop paying companies like CenturyTel for voice lines with USF money. Some of that loss will be made up through new USF broadband subsidies, however, so this deal may be a way for CenturyLink to reap a larger portion of those fees.
And for anyone who wonders how policy has an impact on consumers…
Historically, these telecom consolidation deals have been a loss for consumers and even the firms who make them. Verizon has sold many of its rural assets, leaving its purchasers to file for bankruptcy. Taking on the burden of costly assets and a lot of debt doesn’t seem to be a winning strategy for telephone companies, but maybe the hope is to become something that’s just too big to fail. Given the government’s current focus on boosting broadband, perhaps such a strategy isn’t such a bad idea.