CenturyTel's bid to acquire Embarq is surprising on at least a few levels. The companies may make a good network match, as CenturyTel's mostly rural market networks are combined with Embarq's properties in more urban, but still relatively rural, markets.
However, while Embarq has been rumored to be looking to make a sale for some time, industry watchers might have been expecting a different buyer, either a larger telco or a different peer than CenturyTel, which is actually quite a bit smaller than Embarq. Timing raises some questions, too, as the Federal Communications Commission is pushing changes to intercarrier compensation and the Universal Service Fund that could affect both companies. Those reforms have not fully played out yet, which in the eyes of some may make this a dangerous time to combine two companies that could be harshly affected by the reforms. However, Embarq CEO Tom Gerke suggested that any FCC decisions in these areas probably will be appealed, and that clarity is too far down the road to wait for while line loss, competition and market opportunities continue to move forward.
Meanwhile, CenturyTel also has some areas of interest that Embarq has not, to date, shared. One of those is TV, which CenturyTel has begun to embrace, both as a standalone service and part of a bundle. Embarq has instead focused on a strategy to push fiber deeper into its networks, with the primary intent to support growth in online video usage and however else customers want to use their bandwidth. The telco has not to date wanted to use these facilities as the underpinning for its own TV service. Will CenturyTel steer Embarq into the TV business?
Another area of notable difference is wireless. Neither company has made the cellular market a priority, but beyond that, there seem to be different future intentions. Embarq is winding down a wireless resale partnership with its former parent company, Sprint. Embarq has acted in recent months as though wireless is not a primary concern, and has not yet announced further wireless plans to kick in after the Sprint deal end in the months ahead. CenturyTel sold most of its wireless properties to Alltel about six years ago, though the company made a big spectrum investment earlier this year, buying up 700 Mhz licenses that its will use to enhance its voice and data footprint in its existing markets. In today's conference call discussing the Embarq deal, CenturyTel CEO Glen Post said the company might look for opportunities to trade spectrum and possibly build out coverage in more markets, though specifics remain unclear.
This is an intriguing deal, and more details--as well as more questions--are sure to emerge in the days ahead. Stay tuned to FierceTelecom for the latest.