Rural Local Exchange Carriers Could Consolidate

In the wake of Verizon Wireless' proposed acquisition of Alltel, rural local exchange carriers could become the next hotspot for M&A activity as they scramble to compete with major wireless providers, analysts say.

Companies such as Citizens Communications (CZN Quote), Iowa Telecommunications (IWA Quote), Consolidated Communications (CNSL Quote), Windstream (WIN Quote) and Embarq (EQ Quote) have come under pressure as consumers swap traditional phone lines for wireless substitutes, such as AT&T (T Quote).

Analysts have questioned whether these increased access line losses will affect the sustainability of revenue and free cash flow for these rural local exchange carriers, or RLECs. Additionally, extra competition has come in the form of cable companies that offer triple-play packages including voice services, like Comcast (CMCSA Quote) and Time Warner Cable (TWC Quote). ...