As mergers go, the $5.8 billion, all-stock deal between CenturyTel Inc. (CTL) and Embarq Corp. (EQ) isn’t earth-shattering. It’s not likely to spark a frenzy of RLEC consolidation, analysts said, and competition won’t suffer because few, if any CLECs, target rural markets.
Nonetheless, the timing of the transaction, and the details, are compelling. It comes as both carriers lose thousands of wireline subscribers to VoIP and wireless each quarter. More importantly, though, CenturyTel and Embarq are marrying amid tight credit markets and pending regulatory reform.
Whatever happens with the economy, and whatever changes emerge from the FCC, CenturyTel and Embarq will be better off facing the turbulence as one entity. They’ll be able to move beyond their core strengths into areas including broadband wireless and expanded business services. On the whole, they’ll be able to at least maintain profitability, if not raise it altogether.