Will Centurytel Acquire Qwest And Become The Next Big Baby Bell?
CenturyTel and Qwest announced their intention to merge
. Why is that a big deal? Well among other things, that suddenly means a very small company will suddenly become a large Baby Bell like AT&T and Verizon. Will that work?
First a bit of history. In 1984 the giant AT&T was broken up by the US Government into one big national long distance giant called AT&T and seven Baby Bells which offered local phone service around the country mostly to larger and mid size cities. There were also several hundred smaller local phone companies in smaller markets around the country.
In the mid 1990's the seven started to merge. Today AT&T and Verizon are giant Baby Bells that each cover roughly half the US market. Qwest is the third and smaller one. It is still the same size it was when AT&T was originally broken up. It was US West, but about a decade ago changed names and added long distance.
CenturyTel was one of the very small local phone companies, not a larger Baby Bell. They are now changing their name to CenturyLink. Beyond the name change they are growing rapidly over the last couple years.
Last year this small company acquired Embarq, the nations fourth largest local phone company. It was actually Sprint's local phone business until they spun it off and changed the name to Embarq a few short years ago.
So as of that merger last summer suddenly CenturyTel became the fourth largest local phone company in the country. So far they are handling it well. The Embarq network was also in smaller markets around the US so the match was good.
However Qwest is different. They are a Baby Bell. Sure they are still small. Sure they did not expand like AT&T and Verizon and grow through mergers. Sure they are still the same small company they were in the beginning. Sure they do not operate their own wireless network. They resell Verizon Wireless. Sure they are not building their own television operation like AT&T Uverse or Verizon FiOS. Instead they are reselling the satellite television service of DIRECTV.
However they are still a larger company, a Baby Bell. One of the largest local phone companies in the country, offering service to larger cities like Denver.
Can CenturyTel, a smaller company successfully take on this massive task? That is the question we have to ask. No one yet knows. All we can do it look at the current marketplace and take an educated guess.
CenturyTel is not exactly like AT&T and Verizon. They don't operate their own wireless network or television service. Then again, Qwest has not done this either. Actually these two companies do look more alike today than they would have 5 years ago.
Perhaps this can work. Perhaps they are not done growing through mergers yet. There are other wireless carriers in the marketplace they could work with. They could continue to re-sell Verizon Wireless services. Or perhaps they could acquire a wireless network.
I know nothing about this, but for arguments sake there is a wireless company out there that may make sense. Sprint. They were the company that owned Embarq before they spun it off. They are family of sorts.
All of these various pieces are bubbling together in the big pot called the changing telecom industry and they are cooking.
It is possible CenturyTel could be interested in merging with a wireless company if they think it is important going forward? There is not pressure to move quickly on that yet because their biggest competitors, the cable television industry also tried reselling Sprint wireless and failed so they pulled out a few years ago.
Going forward the question is will CenturyTel and cable television companies like Comcast, Time Warner and Cox successfully get into the wireless business? And if they do will they own their own network or resell?
However these steps are getting a little ahead of ourselves. Today we have to think about the current merger between CenturyTel and Qwest. Yes or no? That is the question.
Currently Qwest has not grown much in the last several years so the question is will this new deal be better for the customers and the shareholders than the stand-alone company? Is this a risk or a sure thing? Who will benefit and who will be hurt, if any?
The debate will go on over the next several months until the approval or denial is given.
by: Jeff Kagan
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