AUSWR
The Association of U S West Retirees
 

 

 

CenturyTel taking large bites

The once-tiny company paid $11.6 billion for Embarq two years ago.

 

By Greg Griffin
The Denver Post

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.

The 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 Monroe.

"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 Baltimore- based telecommunications analyst with Stifel Nicolaus, said CenturyTel "has one of the best, if not the best, management teams in the (local- phone) industry. They're very smart and very disciplined."

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 Louisiana, Post succeeded Clark M. Williams Jr., whose family ran CenturyTel for nearly 60 years, built it into a regional force and took it public in 1978.

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.

University of Louisiana at Monroe president James Cofer, who knows Post, called him "one of the good guys," a humble, small-town boy with an exceptional intellect and an ability to "see things other people can't." He surrounds himself with top-notch managers, Cofer said.

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 ggriffin@denverpost.com