CenturyLink: Making the connection - Sizing up ILEC M&A activity

After breaking free as a sometimes forgotten about subsidiary of Sprint under its Sprint Local Telephone Division (LTD) name, EMBARQ broke out in 2006 with a new logo and CEO Dan Hesse--who ironically left EMBARQ to become Sprint's top man in late 2007. Last October, CenturyTel announced it would acquire the much bigger EMBARQ for $5 billion in an all stock transaction. On one hand, the merger made sense in that the two telcos have complementary focuses: CenturyTel serves primarily rural areas, while EMBARQ serves more urban/suburban but yet still mainly smaller secondary markets. Besides their size, the two telcos appear to have different philosophies about next-gen services.  
 
While EMBARQ was content to drive fiber deeper into neighborhoods and nodes to facilitate more use of online video, CenturyTel has been trialing video over copper. Then, there's of course wireless. Even though neither had been doing much in wireless (EMBARQ was winding down its Sprint MVNO relationship and CenturyTel sold off much of its holdings to Alltell), CenturyTel did purchase 700 MHz spectrum in some markets. What its plans are for wireless and video, however, are still unclear.

What surprised many industry watchers at the time was that given the proposed regulatory changes in the Universal Service fund. At the time, EMBARQ's CEO Tom Gerke said more clarity was needed and they could not wait to move the consolidation ball forward. But with honeymoon period now over, the new CenturyTel axed 55 former EMBARQ employees and said there could be more changes to come.