Embarq’s Reason for Selecting CEO was Evidently in Anticipation of a Merger

Implications: 1.      Many industry observers were scratching their heads as to why Embarq selected a lawyer to run the company. 2.      The fact that regulatory issues are so much a part of an ILEC’s operation seemed way too inadequate as an explanation. 3.      Apparently, it was just simply a matter of Embarq’s board deciding that the best course of action was to become part of a bigger entity as soon as possible.

Analysis:  The Embarq board of directors turning to Gerke was so obvious that many industry analysts missed it.  It just seemed way too premature for Embarq to aggressively seek a merger or acquisition because it had so much to do in fixing a network that had been neglected for about a couple of decades.  And, “while being groomed over the years as a rising executive,” Gerke did not really have the qualifications for heading a service provider.   

The search for a new CEO must have been an eye-opener.  Talented candidates were not attracted to the challenges of an ILEC having to deal with losing a good number of access lines – and in turning a traditional telco-head mentality into a competitive one.   It became clear thatGerke with his experience in “corporate mergers” would be exactly what Embarq needed.  For example, his kind of leadership helped facilitate “streamlin[ling] state regulatory approval to prevent delays in any mergers or acquisitions.”  

So, while Gerke keeps issuing his platitudes about Embarq moving forward, there are also no adamant denials of future M&A activity.  In addition, a recent action by Embarq indicatesthat it is looking to reduce its costs as much as possible to make it more attractive to an acquirer or merger partner.  Nokia Siemens has taken over operation of its voice NOCs.