All that gloom and doom about a credit crunch hurting telecom wasn’t just words on a screen. For example, AT&T Inc. (T) said last week it was having trouble selling its short-term debt for longer than overnight. Now comes word that Embarq Corp. (EQ) is finding out the hard way that raising capital in this financial environment is difficult, if not impossible.
The fourth-largest telco in the United States (by subscribers) wanted to put itself up for sale. Embarq had hired investment bank JPMorgan to explore a sale, but, as TeleGeography pointed out today, the deadline for bids expired. Rumor had it that Windstream (WIN) and Qwest Communications International Inc. (Q) were eyeing an Embarq purchase.
But it’s not to be, at least for now. And research firm ATLANTIC-ACM today released its latest Dataline discussing what most of us already knew: The credit markets’ turmoil is impeding telcos’ ability to secure capital for operations and investment.
“At worst, depending on the length and depth of the credit crisis, some companies could be driven into bankruptcy or consolidation,” wrote analyst Charlie Reed. “At best, virtually all companies will decrease capital expenditures and re-evaluate growth aspirations while they ride out the financial turbulence.”
Reed’s most interesting speculation was this: “As with all broad-based economic and financial problems, the potential for consolidation is again rearing its head (though purchasers may struggle to obtain credit for such activity). Companies such as PAETEC (PAET) and XO (XOHO), which already have experienced significant devaluation (as reflected in stock prices) over the past year, may become increasingly attractive to domestic and international telcos to further expand coverage, as well as to private equity companies.”