CenturyTel/Embarq Plan to Merge

December 17, 2008

CenturyTel and Embarq announced an agreement to merge the two companies on October 26, 2008. Since that time the companies have filed with various state public service commissions and with the Federal Communications Commission for their approval of the merger.

Since the announcement of the merger, CWA has been reviewing the public documents filed with the Securities and Exchange Commission, the State Regulatory agencies, and the FCC to determine what action if any was necessary to protect the interests of our members who are employees of the two companies.

The two companies have structured the merger in such a manner, as to preclude review by many state public service commissions. The merger is structured to take place at the parent (Corporate) level without merging the companies within each state, even when both companies operate within the same state. Once the merger is complete as proposed by the two companies, Embarq becomes a wholly subsidiary of CenturyTel. As presented to the state commissions this is called an indirect change of control. This type of merger is a concern. It limits the ability of state public service commissions to fulfill their responsibility. That responsibility is to make sure mergers of public utilities serve the public good, without that review there is no objective assurance; this merger serves the interest of consumers, employees, or shareholders.

Our research has determined there are still states that must review and approve this merger before it can be consummated. CWA plans to file as an intervener in selected states that will act upon this merger. Our goals aren’t to prevent the merger but to make sure the interest of our members and the public are protected.

We certainly understand the changing environment these companies operate in today. This merger was not unanticipated and there will be more to follow. These mergers are the result of several factors: competition, changing technology, and the lack of investment in network infrastructures. One of our goals in intervention is to get the regulatory agencies to require any cost savings resulting from the merger be utilized to improve the capacity and quality of the networks. Such investment will create improved broadband services that will enrich the lives of their customers and create much needed jobs here in the USA. If investment is not required rural America will stand on the wrong side of the digital divide. We will see continued stagnation in the quality of life of rural America. We will also see continued decline in American jobs and more mergers based on failure rather than success.