Embarq Keeps an Eye Out for Rural Telecom Acquisition Targets

No Author (6.12.2007)

http://www.teleclick.ca/2007/06/embarq-keeps-an-eye-out-for-rural-telecom-acquisition-targets/

Embarq looking to advance their competitive position

Regional telephone provider, Embarq Corp., is positioning itself to acquire smaller competitors in the months and years to come, as the telecommunications sector continues to consolidate.

Buying up small rural phone carriers would help Embarq to slash costs and increase efficiency, said the company’s CEO, Daniel Hesse, in an interview late last week.

“Today you have roughly 800 local exchange carriers in the U.S., and we’re competing with much larger competitors — the wireless companies, the cable companies,” Hesse said. He acknowledging, however, that Embarq had yet to find any specific deals where cost benefits outweighed the likely premiums.

“We’re very well positioned to be an acquirer,” he explained, “but in today’s market, a lot of the prices are too high. And we have a very disciplined approach to looking at acquisitions.”

Embarq — which was spun off by wireless giant, Sprint Nextel in May 2006 — has experienced significant growth in the past year, with its stock price rising over 20% since debuting on the market. Hesse believes that a further increase in value could help his company put together an attractive acquisition proposal.

“The stock has moved up a lot in the past year, not only in absolute terms but relative to the industry. If we continue to perform that well, then all of a sudden our equity can become a currency,” the CEO said, referring to the possibility of an all-stock deal.

Embarq offers local, long distance, and broadband internet services in 18 states, primarily in rural areas, and faces strong competition from major cable and wireless providers.