fool.com
Qwest and CenturyLink Are on the Right Track
November 4, 2010
Regional telecom providers Qwest Communications (NYSE: Q) and CenturyLink (NYSE: CTL) continue on their long-planned collision course, and they're looking more and more alike as they move along.
The earnings picture is mixed, but the companies share drooping revenue curves. In both cases, traditional voice customers are leaving by the bushel, but customers of new services are replacing them. Qwest in particular takes pride in its ability to provide backhaul fiber connections to thousands of cell phone towers, drawing on a market that also keeps Global Crossing (Nasdaq: GLBC) and Level 3 Communications (Nasdaq: LVLT) afloat to various degrees.
Most importantly, both Qwest and CenturyLink are brilliant little cash machines. They report free cash flow totals well in excess of the net income line, comfortably fueling their generous dividend payouts.
This two-headed beast will sport the scale of, well, both networks, along with the technological savvy of Qwest. There will also undoubtedly be plenty of synergistic cost savings involved. You're combining two of the strongest dividend machines I know, and helping both transition into a new-age business model with more data and less voice. The deal's a win-win for both companies, and it's no surprise that each body of shareholders voted in favor of the merger with a crushing 97% majority. |
