FierceTelecom 2010 Prediction: Qwest goes to the auction block?

FierceTelecom Newsletter

Sean Buckley, FierceTelecom

January 3, 2010

 

With many of the tier 2 telcos buying one another, it's probably only a matter of time before one of them gets ambitious and makes a possible move for Qwest, the smallest of the remaining three RBOCs. The idea that Qwest, the third and last standing RBOC, could be a target for acquisition by a tier 2 ILEC such as Windstream or CenturyLink was first posed in a late-2009 in a Reuters article.

While an AT&T or Verizon bid for Qwest is not entirely out of the question, the acquisition of Qwest's 14-state local line operations and possibly its nationwide long-haul network could be attractive to these tier 2s as a means to scale their respective footprints. Tier two service providers have been on the acquisition hunt as they continue to see their respective wireline businesses (all of which lack a wireless component) go to cable and wireline substitution.

Qwest does bring some attractive assets to the table: steady cash flow as well as growing business and wholesale revenues in 2010. And even though Qwest lacks a wireless business, one potential growth opportunity it has set its sights on is wireless wholesale backhaul. This is not the first time that rumors emerged about Qwest being in the M&A cycle. Last June, there was rampant speculation that the ILEC was going to sell its long haul business and assets only to take them off the block when it felt as though it was getting apparently lowball offers. Speculation aside, any tier 2 that could make a bid for Qwest should be prepared to face the reality of not only integrating a bigger network than their own, but a century-long Bell mentality that's likely counter to their business style. That itself would be the biggest challenge and opportunity.