CenturyTel agreed to buy Qwest Communications International in a $10.6 billion all-stock deal, the companies announced Thursday. CenturyTel will also assume $11.8 billion of Qwest debt, making the merger worth about $22.4 billion, one of the biggest in telecom history.
Qwest and CenturyTel are two of the biggest landline phone companies in the country, with combined network assets in about 40 states. The deal comes as Qwest, which abandoned its wireless efforts years ago, has struggled to keep up competitively with other former Baby Bell companies AT&T and Verizon Communications. While these companies do not compete directly when it comes to traditional consumer phone service, they do compete in the business service market.
Qwest, which provides broadband and phone service to consumers in sparsely populated states throughout the West, has struggled over the years to compete with its cable counterparts. As other phone companies focused on building a wireless network, Qwest abandoned its wireless efforts. And while AT&T and Verizon have upgraded their networks with fiber and have begun offering bundled TV service, Qwest has chosen not to invest heavily in new infrastructure.
Things were different some years back. Qwest had built an extensive fiber-optic nationwide network and was a Wall Street darling in the 1990s when the company's value soared to over $60 billion. Then the telecom bubble burst toward the end of the 1990s, and Qwest's fortunes took a turn for the worse. The company was plagued by accounting scandals and its CEO was forced to resign.
In 2005, when it was well past its prime, the company got into a bidding war with Verizon for the long-distance phone company MCI. Eventually, Qwest pulled out of the race and Verizon bought MCI.
When the deal closes, CenturyTel shareholders will own about 50 percent of the new company, and Qwest shareholders will own about 49.5 percent of the company. The deal is subject to regulatory approval and is expected to close in the first half of 2011.