ATLANTIC-ACM Releases CenturyLink - Qwest
April 22, 2010 04:54 PM Eastern Daylight Time
BOSTON--(EON: Enhanced Online News)--ATLANTIC-ACM, a leading telecommunications strategy research
consultancy and benchmarking firm, today released the following analysis of the proposed CenturyLink-Qwest
CenturyLink - Qwest Merger Analysis
By Aaron Blazar (firstname.lastname@example.org), ATLANTIC-ACM Vice President
CenturyLink and Qwest announced plans to merge operations today. The proposed $10.6 billion dollar deal will
effectively bring together the assets of the two ILECs into a company with 17.3 million access lines, 5.2 million
broadband subscribers, 174,000 miles of long-haul fiber, and approximately $5 billion in proforma enterprise
The proposed deal will have several key implications for the competitive structure of the U.S. telecom industry.
l Moves Up Market: The deal provides CenturyLink with enhanced scale in the business market space,
enabling it to continue to build its business customer base while leveraging a broader suite of IP-based
products. On the business side, CenturyLink will be able to effectively move up-market with the addition of
Qwest’s extensive business product portfolio. Since the small business offerings by ILECs are increasingly
coming under fire from competitive cable providers as well as CLECs, this merger will allow the new
CenturyLink to gain a very strong presence in the mid- to large-business telecom market.
l Cross-Sale Opportunities: This combination presents a two-fold, cross-sale opportunity. First, as the merged
company gains a larger end-user footprint, the resulting entity will be able to support a greater portion of
Fortune 500 customers' end-office needs. Second, the addition of Qwest’s advanced IP business product
portfolio and sales force knowledge base will create an opportunity to market a new group of products to
CenturyLink’s embedded small- and medium-sized customer base.
l Third Largest Business Market Player: Based on our latest annual sizing and share analysis, U.S. Telecom
Wired and Wireless Sizing and Share: 2009-2014, ATLANTIC-ACM estimates that the new combined
company will hold a 7.6-percent share of the total U.S. Business Market, ranking it third behind AT&T and
Verizon. The combined company will enhance competition in the business space where Qwest has effectively
grown its presence in the last three years with its strong data product suite. Look for the combined company
to leverage its larger footprint and its expanded product portfolio to grow its share of wallet and to attract new
customers within its last-mile footprint.
l Fourth Largest Consumer Provider: The combination of Qwest and CenturyLink will drive greater scale to the
consumer side of each provider's operations. The combined company will have 5.2 million broadband
subscribers and 17.3 million access lines. ATLANTIC-ACM estimates the combination will yield the fourth
largest consumer telecom company behind AT&T, Verizon and Comcast, with an estimated $7.4 billion in
consumer revenue in 2010. However, both companies have pursued very different strategies in the consumer
space, with Qwest pushing its Fiber-to-the-Node offer, along with satellite TV and wireless resale, while
CenturyLink has invested in rolling out IPTV (although it is in the early stages with only three markets
complete) and purchased wireless spectrum (not yet built out). In the end, the combined company will need to
find success somewhere in the middle in order to effectively compete with competitive cable offers. Ultimately,
in the ongoing battle to retain consumer customers, the combined company will need to formulate and execute
a well-defined strategy while determining ways of overcoming its wireless network deficiencies.
l A Combination of Wholesale Powerhouses: On the wholesale markets level, expect the combined company
to deliver an all-encompassing, end-to-end data product offer, covering a wider expanse of territory, while
trimming CenturyLink’s network costs. Both Qwest and CenturyLink have demonstrated a strong following
among wholesale customers in our research (both won awards based on our 2009 Metro Carrier Report
Card and Qwest won awards based on our 2010 Domestic Wholesale Long Haul Report Card). Meanwhile,
the combination of assets will allow the company to sell end-to-end solutions across a larger footprint, which
may prove advantageous in courting the rapidly-growing wireless backhaul space. Both Qwest and
CenturyLink have announced plans to support the wireless backhaul needs of the Verizon Wireless LTE push.
l Reduced Wholesale Purchasing as Network Assets are Rolled On-Net: Historically, both Centurytel and
Embarq lacked a true nationwide long-haul network, forcing them to purchase wholesale network services
from competitive long-haul providers. With the merger, ATLANTIC-ACM expects that network needs will
be brought on-net, driving cost synergies for the new combined entity. Although this will be positive for
CenturyLink, it will have a negative impact on the overall U.S. long-haul wholesale market. Expect embedded
long-haul voice and data network providers such as Level 3, Global Crossing, XO Communications, AT&T,
Verizon and other carriers to see wholesale revenue losses, though the full extent of the network cost
reductions is unknown and will not take shape in the market. If completed, look for the new company to focus
on gaining momentum in supporting wireless providers' backhaul needs while leveraging the combined
network to gain a greater share of wholesale customers’ wallets. This could pose increased competitive
threats to large embedded long haul and metro wholesale players.
The Bottom Line:
The combination of CenturyLink and Qwest can allow for the expansion of business customer penetration while
trimming network costs. However, the proposed acquisition fails to address both providers' needs for a wireless
solution to drive growth and fill both business and consumer customer requirements. In the end, look for the largest
effects to come in the business and wholesale space as the scope and scale of the newly combined company enable
the pursuit of greater share of buyers' wallets.
Boston-based ATLANTIC-ACM is a leading provider of strategic research and consulting services serving the
telecommunications and information industries. In addition to producing the industry's principal benchmarking, sizing
and opportunity studies, the company assists clients in evaluating telecommunications opportunities for successful
investment, market entry and long-term planning.
For more information, visit ATLANTIC-ACM's website at www.atlantic-acm.com.
Aaron Blazar, +1-617-720-3700