CenturyLink's next M&A target could be Sprint, if AT&T, T-Mobile deal is successful

CenturyLink (NYSE: CTL) may be transforming itself from a rural landline operator to a global service provider focused on delivering a larger suite of IP-based services, but the one missing link in its growing empire is wireless--something an acquisition of wireless operator Sprint might solve, analysts say.

The scenario of CenturyLink buying Sprint comes on the heels of comments made by Dan Hesse, CEO of Sprint (NYSE: S), made during a Congressional hearing last week on how the merger between AT&T (NYSE: T) and T-Mobile would create "duopoly" that would force it into being acquired by another company.

Interestingly, if CenturyLink did buy Sprint it would reunite the former Embarq with Sprint, which spun out Embarq as a separate wireline-centric company that Hesse actually ran, in 2006.

Chris Larsen, an analyst at Piper Jaffray Cos., said that while Sprint could attract Verizon or one of the cable MSOs like Comcast, those deals would be unlikely given cable's wireless misfires and regulatory issues. But what makes CenturyLink a more likely suitor is that not only is being aggressive with M&A, but that it needs to add wireless to its growing service portfolio.

"CenturyLink is a company with a really good balance sheet and looking for areas to invest its capital, its free cash flow in growth," said Larsen in a Bloomberg article. "If Sprint can stabilize and then begin to grow its customer base, it becomes a growth vehicle for them."

When CenturyLink successfully purchased Qwest in April, it instantly became the third largest service provider, trailing AT&T and Verizon (NYSE: VZ). However, CenturyLink's ambitions aren't just relegated to the U.S., as it is in the process of buying cloud and data service operator Savvis for $2.5 billion, a deal which will give it presence in Asia and Europe.

If CenturyLink acquired Sprint or another wireless operator, they would be able to gain another element along with its growing IPTV business offset ongoing wireline voice losses and the maturation of their broadband offerings.

Scott Sloat, a spokesman for Sprint, Debra Peterson, a spokeswoman for CenturyLink, and Tom Tauke, a Verizon spokesman, would not comment on any speculation about their M&A strategy or a potential purchase of Sprint.

For more:
- Bloomberg has this article

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