Citizens, CenturyTel mull rural consolidation
Wed Mar 29, 2006 7:03 PM ET
By Sinead Carew
NEW YORK, March 29 (Reuters) - Citizens Communications Co. (CZN.N: Quote, Profile, Research) and CenturyTel Inc. (CTL.N: Quote, Profile, Research) may take part in the consolidation of the U.S. telecommunications industry, according to top executives who laid out criteria for potential deals on Wednesday.
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Citizens, CenturyTel mull rural consolidation
Citizens Communications names new CFO
As Alltel Corp. (AT.N: Quote, Profile, Research) and Sprint Nextel Corp. (S.N: Quote, Profile, Research) spin off their local phone units, and AT&T Inc. (T.N: Quote, Profile, Research) plans to buy BellSouth Corp. (BLS.N: Quote, Profile, Research), some investors are expecting another spate of deals in the local telephone service market.
Citizens' President Jerry Elliott said mergers should help local providers operate more efficiently by pooling costs for information technology, accounting and human resources.
"There's no reason to have a bunch of stand alone companies. As many of them as possible should be combined," Elliott said on the sidelines of the Bank of America's Media, Telecommunications and Entertainment conference.
A banker familiar with the industry believes CenturyTel and Citizens are ripe for consolidation because they need more phone lines and services to compete against larger rivals.
Elliott said Citizens was "agnostic" as to whether it would be a buyer or a seller, but if it was to buy another company, it would ideally be in another rural market, where there is less competition and customers are more loyal.
The U.S. south-west and mid-west would be Citizens preferred geographic location for potential mergers and any deal would have to allow the company to maintain its dividend to free cash flow ratio of around 60 percent, Elliott said.
Stamford, Connecticut-based Citizens, which operates in 24 states, plans to pay a 25 cent dividend on March 31.
Elliott did not name any potential acquisition targets and said he did not "know of any today."
CenturyTel's Chief Financial Officer Stewart Ewing said his company would be most interested in deals for phone lines close to its operating region, unless they were big enough deals, with 50 to 100 thousand lines, to be worth going further afield.
"There's certainly properties we'd look at if they were to come on the market," he said at the same conference. CenturyTel operates in 26 states in rural areas and small- to mid-size cities.
He would not comment on specifics but said any deal would have to look more attractive to shareholders than CenturyTel's repurchases of its own shares. CenturyTel said last month its board authorized a stock repurchase of up to $1 billion.
Asked if CenturyTel would entertain any acquisition offers, Ewing told the audience: "I'm convinced our board would do the right thing if we were approached with an attractive offer."
But he said a sale would not be a requirement.
"We think we're large enough to have the scale ... to manage the access lines we have," he said.
He said CenturyTel may consider raising its dividend if it does not find other suitable investment opportunities. Monroe, Louisiana-based CenturyTel's dividend is just over 6 cents per share. (Additional reporting by Jessica Hall in Philadelphia)
