Both companies reported quarterly results on Wednesday morning, and both reports boiled down to the same conclusion: Traditional voice services are dead -- long live high-speed data networks!
Here's the tale of the tape:
|Revenue||$2.94 billion||$1.75 billion|
|Year-over-year Revenue Growth||(3.9%)||(6.4%)|
|EPS Growth YoY||N/M||(7.7%)|
Source: Company reports, N/M = Not meaningful.
As you can see, 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.
Who's your favorite dividend-paying telecom? Share your secrets in the comments below.