Rural telecom Windstream (NYSE: WIN) just made a big, splashy acquisition. By swapping out some $890 million of fresh shares to current PAETEC (Nasdaq: PAET) owners and assuming $1.4 billion of net debt, Windstream becomes a full-featured provider of voice and data services. More specifically, the rural giant starts to reach into big cities, all thanks to PAETEC's coverage.

The telecom industry is consolidating, and fast. Windstream's move comes only months after regional telecom CenturyLink (NYSE: CTL) picked up data specialist SAVVIS in a deal eerily similar to the Windstream announcement. Verizon (NYSE: VZ) has joined forces with Terremark in another cross-sector deal, and Level 3 Communications (Nasdaq: LVLT) is working up a merger with fellow long-distance data slinger Global Crossing (Nasdaq: GLBC). And we haven't even looked at the wireless industry yet. Take a nap, and you'll wake up to a whole new telecom industry full of overlapping big boys.

PAETEC gives Windstream more than just an expanded footprint. There's an attractive basket of cost synergies between the two, and the deal also gives Windstream access to some $650 million of operating-loss tax write-offs. The combined value of these attributes comes out to about $150 million a year over the next five years, according to Windstream's calculations. That would be a nearly 50% boost to Windstream's $310 million of net income in 2010. It's officially a big deal.

If and when the deal closes, current PAETEC shareholders will own about 13% of the combined company. In my eyes, the improved earnings power would be worth the one-time share dilution. Fellow Fool Matt Koppenheffer disagrees on that point: he gets "a little nervous when a company makes a big acquisition with stock."

Where do you stand? Is this a smart deal or an evil harbinger of needless dilution? Add PAETEC and Windstream to your Foolish watchlist so you can keep track of this deal, then drop down to the comments box to give us your take on the situation.