Qwest's Euteneuer: Service provider industry consolidation was necessary

Qwest's (NYSE: Q) merger with CenturyLink (NYSE: CTL), arguably along with Frontier's acquisition of Verizon's rural lines will go down as one of many deals to consolidate the Tier 2 telecom service provider market.

Joseph Euteneuer, Qwest's current CFO, said that the consolidation of the Tier 2 service provider industry was inevitable.

"In looking out at the landscape of the telecom market, we really believe that consolidation is something that really needed to happen in this marketplace similar to cable TV," he said in an interview with Bloomberg at the recent MIT Sloan School CFO conference.

Euteneuer added that he feels confident about the CenturyLink deal, which now needs nine more state PUC approvals and the FCC's approval.

"When you look at cultural fit, the size of the two companies and direction of the two companies, I think this is a good transaction."

While Qwest may now be firmly down the path with its CenturyLink merger, it wasn't the only deal the service provider had entertained. A flood of rumors emerged in April 2009 that Qwest was putting its long-distance network assets on the table and that AT&T, Verizon Communications, Level 3 Communications and tw telecom had expressed interest in the assets.

However, these rumors were quickly put out when the company issued a statement in June 2009 that while it carefully reviewed a number of "unsolicited indications of interest" from potential buyers, Qwest decided it was better to just keep the assets.

Apparently, the service provider felt as though the rumored suitors could not pony up the between $2 billion to $3 billion it felt the assets were worth.

"We had some reverse acquires interested in the long-distance business," he said. "As a result of good corporate governance, we said we needed to entertain those inquiries," adding that we "realized that wasn't the best thing for our shareholders."

Hired by CEO and Chairman Ed Mueller in September 2008 after tenures at both Sirius Satellite Radio and Qwest's chief rival Comcast, Euteneuer is credited with helping to clean up its financial situation.

Since becoming CFO, Euteneuer said that the ILEC had been able to "take $3.5 billion of debt out of our capital structure to where we have just got an investment grade rating after being high yield and the stability of our free cash flow and our EBITDA to maintain that was phenomenal execution of our operations team."

Even though Euteneuer will leave the company when it completes its merger with CenturyLink, his work to help turn around Qwest's financial situation has raised his telecom industry profile.

It's likely that these attributes are what's driving Sprint (NYSE: S) to woo Euteneuer to take over as their financial chief when current CFO Bob Brust retires next year.

Although Euteneuer did not mention Sprint, he did acknowledge he's been approached by a number of people, adding that "for right now I am focused on getting this deal closed."  

For more:
- see the Bloomberg video report here

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