CenturyTel taking large bites
The once-tiny company paid $11.6 billion for Embarq two years ago.
By Greg Griffin
April 23, 2010
Qwest is the larger company in the deal with CenturyTel announced Thursday. Qwest has 40 percent more phone-line customers and more than twice the annual revenues.
But those familiar with CenturyTel and its management weren't surprised that the Monroe, La.-based company was the buyer in the transaction.
Qwest acquisition is the latest in a string of deals CenturyTel
has made to grow from a small regional player in the early 1990s
to the third-largest local-phone company in the country. Its
roots are even more humble: In 1930, the company, then known as
the Oak Ridge Telephone Co., had 75 customers and operated from
its owners' family room in
"CenturyTel did not grow from a tiny little rural exchange to the size it was before the Qwest deal without a considerable degree of savvy in the business," said Robert Eisenstadt, an economics professor at the University of Louisiana at Monroe. "These people are very good at what they do, and so far they've done quite well."
Christopher King, a
CenturyTel began an acquisition binge in the early 1990s,
when Glen F. Post III became chief executive. A company veteran
who went to college in
When Post took over, the company had about 325,000 phone-line customers. In 1997, CenturyTel bought Pacific Telecom, adding 650,000 customers. By 2002, CenturyTel had grown, mostly through acquisitions, to 2.5 million phone-line customers.
In 2008, Post made a bold move, agreeing to pay $11.6 billion in a stock- and-debt transaction for Embarq, the former land-line business of Sprint. The deal more than doubled the size of CenturyTel, which began operating under the name CenturyLink. It was the first time CenturyTel had made a major move into urban markets.
Through the Embarq merger, CenturyTel gained two high-profile board members: former Missouri Rep. Richard Gephardt and William A. Owens, former vice chairman of the Joint Chiefs of Staff.
Post was not available for an interview Thursday.
There had been speculation in recent months that CenturyTel might buy Qwest, but the timing surprised some analysts who expected the company to wait until the integration of Embarq was further along.
Standard & Poor's said Thursday that it may cut CenturyTel's credit rating, reflecting Qwest's heavier debt load. Qwest's debt-to-capital ratio is 109 percent, compared with CenturyTel's 45 percent.
Qwest took on massive debt to buy U S West in 2000 and then almost went bankrupt. The company's leaders have spent the past eight years shoring up Qwest's finances and trying to sell the company.
Despite its successes, CenturyTel still faces the challenge of succeeding long term in the shrinking phone-line business. Neither company has a strong wireless operation. Observers said Post, 56, is certainly already considering his options.
"He's probably already planning the next move," Cofer said. "He thinks ahead of the game."
Greg Griffin: 303-954-1241 or email@example.com