We're three weeks away from a shareholder vote that probably will make discussing Qwest Communications (NYSE: Q) as anachronistic as pet rocks, New Coke, or Milli Vanilli's greatest hits. But there's business to report on until then and a couple of quarters beyond, as the proposed merger with CenturyLink (NYSE: CTL) hasn't closed yet.
The helping hand from a fellow regional telecom operator should be very welcome to Qwest shareholders. In the just-reported second quarter, Qwest saw sales tapering off to $2.9 billion, 5% below the year-ago period. Adjusted free cash flow is shrinking even faster at a 7% clip, and earnings per share lost 25% of the spring in its step, landing at $0.09. In a business where economies of scale are everything, it only makes sense for small-timers such as CenturyLink and Qwest to pool their resources. Meanwhile, in other parts of the country, Frontier Communications (NYSE: FTR) is buying landline operations in 14 states from Verizon (NYSE: VZ). And so it goes.
That's not to say that Qwest's results are entirely without bright spots, of course. As landline subscribers pack their bags and move out, Qwest is landing more customers for its fiber-optic Internet accounts. Business customers are especially keen on that high-speed product, and the network also extends to power the data needs of more than 600 wireless cell sites.
Still, CenturyLink is gearing up for the merger, and I don't see any reason why Qwest owners would pull out now. One stumbling block was removed over the weekend as CenturyLink switched satellite TV allegiance from DISH Network (Nasdaq: DISH) to DIRECTV (Nasdaq: DTV), a move that makes Qwest's DIRECTV-friendly operations easier to blend into the CenturyLink mix.
Are you sad to see Qwest go, or has the company overstayed its welcome? Share your thoughts and feelings in the comments below.
