World VoIP NewsCenturyTel buying Qwest in deal worth USD 22bnCenturyTel buying Qwest in deal worth USD 22bn

CenturyTel buying Qwest in deal worth USD 22bn

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CenturyTel, the USA’s fifth largest local fixed line telephony provider by subscriber lines, announced yesterday that it will buy rival Qwest Communications International, the third biggest operator in the local access sector, in a share swap deal worth USD10.6 billion in stock, plus USD11.8 billion in debt.
The purchase of Denver-based Qwest will create an operator with around 17.5 million subscriber lines across 37 states, and a more viable competitor to giants AT&T and Verizon in a shrinking local fixed voice market. The new company is to be based at CenturyTel's headquarters in Monroe, Louisiana. The merger will see CenturyTel (which uses the CenturyLink brand) leapfrog the fourth-placed local telephony operator, cableco Comcast (which overtook CenturyLink during 2009), whilst giving the enlarged PSTN company more opportunity to expand the reach of broadband internet services, especially in the face of government plans to reduce subsidies for rural basic telephone services in favour of broadband connections. Qwest operates PSTN services in 14 mostly western US states, but has a heavy debt load, inhibiting its ability to expand further by itself. CenturyTel and Qwest expect the merger to save the combined firm around USD625 million in costs over three to five years after closing the deal.

According to the Associated Press (AP), CenturyTel is offering stock worth around USD6.02 per share for each Qwest share, a premium of about 15% on Qwest's Wednesday closing price of USD5.24. When completed, Qwest shareholders will receive 0.1664 CenturyTel shares for each share they own, and will hold 49.5% of the new company, while CenturyTel stockholders will own 50.5% of the business. CenturyTel also agreed to assume USD11.8 billion in Qwest's debt. Both telcos’ boards have approved the tax-free acquisition, which is expected to close in the first half of 2011. Last year CenturyTel acquired another rival fixed line telco, Embarq.

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