Landlines and land mines: analysts are mixed on Qwest-CenturyLink merger, but principals see strength in complementary customer bases.

• Author: Peterson, Eric

The blue beacon of Qwest is gone from the Denver skyline, as memories of the dot-com rise and fall and the trial of Joe Nacchio have gone similarly dim. From the haze emerges CenturyLink, which - after closing on its deal to acquire Qwest in March for about $10.6 billion (and assuming another $11.6 billion in debt) - is the nation's third-largest telecommunications company. Look for the rollout of the CenturyLink brand in Colorado on everything from phone bills to billboards next month.

But the competitive landscape in telecommunications is in the middle stages of a major tectonic realignment, as broadband and wireless providers whittle away at the legacy landline market - one of Monroe, La.-based CenturyLink's strong suits.

And just two weeks before the Qwest-CenturyLink deal was consummated. AT&T stole the M&A spotlight when it announced it was acquiring T-Mobile USA for S39 billion to potentially become the country's largest wireless provider; whether the Federal Communications Commission will approve the controversial deal or not remains to be seen.

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But back to CenturyLink. Analyst reviews of the merger with Qwest were mixed. Moody's liked the deal, but warned that the business model must shift away from landlines toward wireless and broadband - or else.

"The long term viability of wire line-only carriers relies on their ability to transform from regulated, voice-centric businesses to de-regulated broadband-focused providers," the debt-rating agency's statement read in part.

Donna Jaegers, a telecom analyst with D.A. Davidson, agreed with Moody's analysis but wasn't ready to recommend the stock. (D.A. Davidson's latest coverage rates CTL as an "underperform.") "Qwest diversifies CenturyLink's risk on regulatory issues," Jaegers says, citing an expected FCC tightening on intercarrier compensation rates later this year. "But other than that. Q_west 's a huge melting ice cube because consumers continue to leave the company at a 12 percent pace year over year. CenturyLink has promised $575 million of cost synergies. I think that's realistic, but it's not like there are other layers of cost they can cut after that."

Locally, Colorado lost a significant corporate headquarters, but CenturyLink has no plans to abandon the state. Home to CenturyLink's B2B division, metro Denver is also one of six regional headquarters for the company, along with Phoenix, Minneapolis, Seattle, Wake Forest, N.C.; and Apopka, Fla.

After the...