Verizon
Qwest is exploring a possible sale, the Wall Street Journal reported today, listing AT&T Inc. and Verizon Communications Inc. as potential acquirers. The network may fetch as much as $3 billion, the newspaper said, citing people familiar with the matter.
The business, which carries data traffic across long distances for business and wholesale clients, has struggled to lure corporate customers away from larger AT&T and Verizon. Those two may shy away from bidding because of antitrust and financing concerns, King said.
“One way for Qwest management to get some value for the company is to break it up and sell it piecemeal,” said King, who is based in Baltimore. “Im just not necessarily sure anyone will be able to step up to the plate.”
Qwest had less than 5 percent of the market for large corporate customers, according to a February estimate from Chief Financial Officer Joseph Euteneuer. Qwest and its rivals are vying for business amid the worst economic slump in at least a quarter-century, prompting customers to slash technology budgets.
Verizon agreed to acquire wireless carrier Alltel Corp. in June, before the financial crisis deepened. Verizon, which partly financed the acquisition with more than $20 billion in debt, may not want to borrow more, making it an unlikely suitor, King said.
Unlikely Suitors
AT&T, in contrast, may face regulatory concerns if it were to pursue a deal, owing to its size, according to the analyst. He advises investors to hang onto Qwest shares.
The network is separate from Qwests traditional phone line business in 14 western U.S. states. Qwests profit has declined for four straight quarters as subscribers abandon land-line service in favor of mobile phones and packages from cable companies. Customers dropped more than 1 million lines last year, pushing revenue down for a second year in a row.
Nick Sweers, a spokesman for Denver-based Qwest, declined to comment, as did Verizon representative Eric Rabe. AT&T spokeswoman Katherine Eller declined to comment.
Qwest climbed 33 cents, or 9.7 percent, to $3.75 in New York Stock Exchange composite trading. The shares have risen 3 percent this year, compared with a 9.1 percent drop at AT&T and a 7.9 percent decline for New York-based Verizon.