Sprint’s Most Likely Buyer May Be CenturyLink After AT&T Deal

Sprint Nextel’s Dan Hesse told Congress last week the third-largest U.S. wireless operator may end up being acquired if AT&T Inc. purchases T-Mobile USA Inc. The most likely buyer is CenturyLink, the biggest company in telecommunications without a wireless unit, analysts said.

CenturyLink, based in Monroe, Louisiana, is the most logical acquirer because it has the financial resources, it’s shown an appetite for big deals and it needs a wireless business, say analysts including Chris Larsen of Piper Jaffray Cos. Though there are other potential buyers, such as Verizon Wireless or cable companies, they’re less likely because of regulatory hurdles or integration risks, he said. “CenturyLink is a company with a really good balance sheet and looking for areas to invest its capital, its free cash flow in growth,” said Larsen. “If Sprint can stabilize and then begin to grow its customer base, it becomes a growth vehicle for them.”

CenturyLink has become the third-largest US landline company through several recent deals. The company bought Embarq in 2009 for about $12 billion and completed the purchase of Qwest Communications this year for more than $20 billion. It cut a $2.5 billion deal for Savvis last month to expand its cloud-computing services. CenturyLink could use a mobile service to boost sales as customers abandon home-phone lines and growth in demand for Internet services tapers off. The company may be ready to acquire Sprint in the next couple of years, according to analysts. “If CenturyLink imagines itself as a long-term player in the enterprise segment, they may need to add wireless,” said Sanford C. Bernstein & Co.’s Craig Moffett. “You have to put them as perhaps the most likely long-term acquirer” for Sprint. CenturyLink’s market value was about $25 billion, compared with about $15 billion for Sprint, before today’s trading. The company bought both Embarq and Qwest with stock. A deal for Sprint would reunite the wireless company with Embarq, a landline operator that spun off from Sprint in 2006 and was run by Hesse at the time. CenturyLink completed the Qwest deal in April and may want to finish absorbing the new customers and assets before taking on another large merger, Larsen said.