WRAPUP 4-CenturyTel to acquire Embarq in $5.8 bln deal

* Deal represents 36 pct premium over Embarq's Fri. close

* CenturyTel Q3 shr $0.82 vs estimate $0.83

* Embarq Q3 shr $1.40 vs estimate $1.30

* CenturyTel down 12 pct, Embarq up 6.7 pct (Adds analyst's quote, share price update)

NEW YORK, Oct 27 (Reuters) - Rural telephone company CenturyTel Inc (CTL.N) plans to buy bigger operator Embarq Corp (EQ.N) for $5.8 billion in stock in an effort to cut costs and stay competitive as traditional phone lines decline.

Analysts said the deal would spark more consolidation in the rural telecom space as consumers increasingly switch to wireless and cable services for phone services, leaving acquisitions as the best way for network operators to grow.

Under the deal, shareholders of Embarq -- the biggest U.S. rural service -- will receive 1.37 shares in CenturyTel for each Embarq share they own, the companies said on Monday. This is equivalent to $40.42 of CenturyTel stock for each Embarq share, or 36 percent above Embarq's Friday closing price.

Centurytel, which will also assume $5.8 billion Embarq debt, saw its shares fell 13 percent. Embarq's rose 4 percent.

Stanford Group analyst Michael Nelfon said the deal was good for both companies as it will allow them to return more cash to shareholders as dividends and buybacks, which investors see as the main attraction to investing in traditional operators.

"Most importantly the deal should be accretive to free cash flow per share, the most important metric for the rural carriers," he said. Free cash flow is earnings after capital spending costs but before depreciation and amortization.

CenturyTel said it expects related savings and revenue benefits of about $400 million within the first three years and sees the deal boosting free cash flow per share in 2010, the first full year after the expected second-quarter close.

It said the savings will come from reduction of corporate overhead and elimination of duplicate functions, new revenue opportunities and increased operational efficiencies but did not give specific details of layoff plans.

CenturyTel Chief Executive Glen Post said the deal gives it a new set of customers as well as a way to cut costs.

"It improves our competitive positioning as a company. It lowers our costs," Post said in an interview with Reuters. "It improves the mix of our customer base, especially with Embarq's business and enterprise customer base."

CenturyTel temporarily suspended its current share repurchase program pending completion of the transaction, but it said it expects buy back some shares and continue its current dividend policy after the deal closes .

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