The deal has an enterprise value of $22.4 billion, including $11.8 billion of Qwest debt. The firms expect to save $625 million in costs through the merger, the companies said.
If approved by regulators, the deal would leave just two of the former Regional Bell Operating Companies that were spun off from the old AT&T more than two decades ago. Verizon Communications and a reconstituted AT&T -- both assembled after combining other Baby Bells -- are the two surviving RBOCs.
Qwest has suffered from a series of problems including insider trading and accounting scandals, but in recent years the firm has been stabilized by CEO Edward Mueller.
"This combination will enhance our ability to deploy innovative IP products and high-bandwidth services to business customers, and offer superior, differentiated video products," said CenturyTel CEO Glen Post III in a statement. The acquisition calls for CenturyTel to be the dominant entity in the merged company with 50.5% ownership of the combined company and Qwest shareholders to have 49.5%.
"We look forward to becoming part of a larger company with a strong financial profile," said Mueller.
The new company, which is strong in traditional landline operations, will operate in 37 states.
Qwest laid off some workers in its fiber optic unit this week, possibly in preparation for the merger. In addition to its large debt, Qwest's business was hampered by a lack of a wireless unit of its own. Qwest sold a mobile service operated by Verizon Wireless.
Qwest recently reported that its debt totaled $14 billion. The firm said it had $575 million in cash.