We had previously written upon the dealings between Verizon Communications (VZ) and smaller historically rural local exchange carriers such as CenturyLink (CTL) and FairPoint Communications (FRP). We remembered that there was much buzz a few years ago when Verizon announced the sale of its Northern New England Wireline operations located in the states of Maine, New Hampshire and Vermont to FairPoint for $2.2B in cash and shares of FairPoint common stock in a Reverse Morris Trust. Under this plan, the cash portion of the deal went to Verizon Communications and 35M shares issued by FairPoint went to Verizon’s shareholders. This transaction increased FairPoint’s customer base by 746% and made FairPoint the eighth largest telephone company in the US. The price to do all this was steep and forced FairPoint to tap the capital markets for $1.6B in new debt.
CenturyLink’s predecessor Qwest Communications (Q) partnered up with Verizon Wireless in a 5 year deal in 2008 in which Qwest shut down its Qwest Wireless MVNO and agreed to market Verizon Wireless devices through its sales and service channels and gave those customers the choice of being billed directly by Verizon Wireless or as part of their Qwest Communications bundle. When CenturyLink announced in 2010 its agreement to acquire Qwest, it agreed to a wireless reseller deal with Verizon Wireless. Our thesis is that CenturyLink/Qwest ended up with a better deal from Verizon than FairPoint and in this report, we will prove or disprove our thesis.
CenturyLink is the third largest wireline telephone company in the US by revenue and the largest of the historically rural incumbent local exchange carrier. It was founded as Central Telephone and Electronics in 1968 and became CenturyLink in 2010 one year after its completed its acquisition of Embarq.
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