Skyline of Richmond, Virginia

Telecom Embarq for Sale?

10.05.08

Report: Embarq put self up for sale, but buyers can’t raise cash in turbulent market
Tom Gerke, Embarq’s CEO, likes to say ## over and over and over again ## that running his company as well as possible is the best way for Embarq to control its destiny at a time the landline telephone industry is consolidating.
Apparently running the company well also includes hiring an investment banker to look for a buyer.
The Wall Street Journal is reporting that Embarq hired J.P. Morgan Chase & Co. to sniff around for any possible buyers.
“We don’t comment on rumors or speculation,” Debra Peterson, an Embarq spokeswoman told me this evening.
Embarq spun off as a stand-alone company from Sprint Nextel two years ago. We have been reporting for months that Embarq is a likely player in a consolidating landline industry.
Windstream, the landline operation that once was a part of Alltel, was cited as the most likely buyer. Qwest Communications in Denver was another possibility.
The deadline for bids came and went in recent weeks, according to the report. Any interested buyers were crunched by the turmoil in the markets that prevented them from raising the cash needed to buy the Overland Park, Kansas Company. Embarq closed the day Wednesday with a $40.20 share price and a market cap just north of $5.7 billion.

This story from SprintConnection is backed up by the Wall Street Journal article; http://online.wsj.com/article/SB122289656118695665.html

Now for the spin from CEO Tom Gerke, a former attorney specializing in Acquisitions and Mergers;

Dear employees:

I had the pleasure of being in Tennessee and Virginia yesterday and this morning for meetings with employees, customers and community leaders. I heard from employees who had questions about the recent Wall Street Journal article speculating on telecom industry consolidation and EMBARQ’s role in that activity. I’m sure many of you have similar questions. As I shared with employees, we, like all of the other companies mentioned in the article, and like virtually all public companies, have a policy that we do not comment on rumors and speculation.

However, I want to share with you some thinking on this issue to consider as you focus on your daily work:

• It was disappointing to see a story based on rumor and speculation published by the newspaper. It is an unnecessary distraction to the EMBARQ team and our customers.

• Under public company standards and securities laws, the company does not, and should not, comment on rumors and speculation.

• Public speculation is a fact of life in business and certainly in our industry sector. As employees, it is natural to be interested in speculative discussion, but we also have to maintain awareness of the fact that this speculation is not in our best interest from multiple points of view, not the least of which is the natural distraction that it can create in our business and day-to-day results.

• Consolidation is already happening in our industry and likely will continue. Our board, like every public company board, has an obligation to regularly look at our strategy and possible strategic alternatives to enhance the future value and success of the company.

• The best we can all do is to focus on producing results, because positive results give each of us the greatest amount of control over our near term performance and our future. As an employee, you best position yourself for the future by being invaluable to the organization. So, work to ensure the company is maximizing its value and you are maximizing your value to the company. Our competitors are only waiting for us to be distracted – let us not do them that favor.

• What can we do? We can strive to execute our five-gear strategy and do so consistent with our values – the EMBARQ Essentials. Successful execution of our strategy will lead to positive results for the EMBARQ team at a time when industry changes and economic factors make success more elusive than ever.

While we cannot control additional media speculation, we can control whether we stay focused and continue to produce enhanced customer experiences and positive financial results.

Thank you for maintaining your focus and for all you do for EMBARQ each day.

Tom