Embarq deal won’t affect phone rates

The proposed $5.8 billion buyout of Embarq Corp., the dominant local phone company serving Southern Nevada, will not affect rates customers pay for basic telephone service, state consumer advocate Eric Witkoski said Monday.

The Nevada Legislature set rates for Embarq when it enacted a law during its 2007 session. So Witkoski said he is mainly concerned that Monroe, La.-based CenturyTel, which agreed Monday to buy Embarq, maintain the same quality of service.

CenturyTel needs approval from the Public Utilities Commission before taking over the Southern Nevada operations where Embarq employs 1,100 workers.

It would be the second corporate change for Embarq workers since 2006 when Sprint Nextel Corp. spun off Embarq.

The International Brotherhood of Electrical Workers Local 396 is reviewing the proposed merger to determine how it will affect its 800 members at Embarq in Las Vegas, said IBEW business manager Charlie Randall.

Workers already are nervous at Embarq, he said, because the company was planning to lay off 50 workers. Embarq told him Monday that the layoffs are on hold because of the merger agreement, Randall said.

CenturyTel is offering to swap its stock for Embarq shares, valuing the Embarq shares at $40.42 or a 36 percent premium to Embarq's closing price Friday. CenturyTel also would be assuming $5.8 billion in debt at Embarq.

"This increases CenturyTel's exposure to some difficult economic environments like Las Vegas and Florida, markets that have been a little more hard-hit than they're used to serving," Chris King, a Stifel Nicolas & Co. analyst, told Bloomberg News.

Embarq also operates in North Carolina, Ohio, Texas, Virginia and Pennsylvania.

In Southern Nevada, cable television company Cox Communications has become a major competitor of Embarq for phone service. Cox offers telephone service to business and residential customers throughout the Las Vegas metropolitan area except Boulder City, where it intends to start serving later, Cox spokesman Juergen Barbusca said.

Also, Cox reported Monday that it intends to begin offering wireless service although a spokeswoman said Cox hasn't disclosed when it might start offering local mobile phone service. Embarq also sells wireless phone service.

Embarq shares rose 64 cents, or 2.15 percent, to $30.38 on the New York Stock Exchange. CenturyTel shares dropped $3.88, or 13.15 percent, to $25.62, also on the NYSE.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.