Uncommon Wisdom

Aug 9 2010   11:48AM GMT

Q2 reports show cause for concern for CenturyLink-Qwest

Tom Nolle Tom Nolle Profile: Tom Nolle

The CenturyLink acquisition of Qwest is starting to look like an alliance of the weak, much as we’d feared. Neither company did all that well in their latest quarter in our view. Qwest reported better profits but sharply lower revenues, and CenturyLink gained on acquisitions but failed to add very much in the way of broadband customers.

The CenturyLink-Qwest marriage is weak because it lacks both wireless and a credible fiber to the home (FTTH) opportunity. Wireless probably means more in Qwest’s region than in most areas, because of the rural nature of the territory and the behavior of users there.

We see this kind of deal as being a consolidation for efficiency play, and cost management economies of mergers are hard to achieve and impossible to continue over time. The question we think needs asking is what happens when the combined company struggles and possibly fails.

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