Qwest says has no plans to alter bids

    By Jessica Hall
    NEW YORK, June 15 (Reuters) - Qwest Communications
International Inc. on Tuesday said it has no plans to alter the
terms of its unsolicited bids to buy U S West Inc. and Frontier
Corp. despite a harsh stock market reaction that cut the No. 4
long distance phone company's stock price by 22 percent. [hallelujah!]
    But without a major recovery in its stock or a sweetening
of its offers for the two telecommunications companies, the
chances of Qwest's bids succeeding are seen as slim, analysts
said. [hallelujah!]
    The unexpectedly large drop in Qwest's (NASDAQ:QWST) stock price
has eroded the initial financial advantage Qwest's bids were
perceived to have over U S West's and Frontier's existing
merger agreements with Global Crossing Ltd. (NASDAQ:GBLX).
    Yet, when asked if Qwest planned to sweeten the offers it
unveiled on Sunday, Qwest spokesman Tyler Gronbach said "not at
this time. We certainly think it's a simpler and clearer and
superior proposal."
    Global Crossing is sticking with its current offers, too,
sources familiar with the situation said. Global Crossing on
Monday said its deals with U S West (NYSE:USW), a local phone
company, and Frontier (NYSE:FRO), a local and long distance phone
carrier, were superior to Qwest's proposals and it expects the
deals to close as scheduled. [hallelujah!]
    Qwest said it had expected its stock to weaken somewhat on
the news of its bids, but the extent of the drop was
surprising. The company attributed some of the decline to
general weakness in technology-related stocks on Monday. [take off 
them rose colored glasses, boys!]
    "Yesterday we got caught in the downdraft. We did not
expect this large of a drop, but it was largely (due to) the
day that was had on the market... The dust is kind of settling
and people who are recognizing the strategy are getting back in
the game," Gronbach said. [pardon my French, but bullshit!]
    Shares of Qwest gained 75 cents on Tuesday to $34.875 on
Nasdaq, but the stock is still off 22 percent since the bids
were unveiled.
    Global Crossing's stock also is down significantly -- about
21 percent -- since it announced the U S West deal in mid-may
as investors frowned on the complex deal structure. On Tuesday
its stock fell $2.125 to $48.31.
    U S West lost $1.875 to $56.125 and Frontier added 25 cents
to $57.625.
    U S West and Frontier now will have a tough decision in
weighing two offers that are financially similar but
structurally very different. Both companies said they would
review Qwest's proposal but declined further comment.
    Qwest's offer for U S West is currently valued at about
$62.63 a share or $32.3 billion, compared to Global Crossing
offer, now valued at $60.795 a share or $31.3 billion. Qwest's
bid for Frontier is currently worth $63.06 a share or $11.4
billion or roughly equal to the Global Crossing deal.
    The boards of U S West and Frontier must deem Qwest's bids
superior before they could entertain negotiations with the
Denver-based long distance company. Without a strong rebound in
Qwest's stock price, the boards are unlikely to select Qwest's
proposals, analysts said. U S West would owe an $850 million
break-up fee to Global Crossing if it terminated the deal. [hallelujah!]
    The growth potential of the bidders, both telecom upstarts
building fiber optic phone and data networks, may play a role
as the board weigh the bids, analysts said.
    In that regard, Qwest may have an advantage since it has
more of a track record and a more developed business than its
even younger rival Global Crossing, analysts said. [uh oh]
    Qwest, however, may have to work harder to sell its
strategy. Some analysts said Qwest did not adequately explain
its reasoning for the bids nor why it has departed from its
previous focus on business customers to make a costly bid for U
S West, which is primarily a residential phone company serving
14 states from Minnesota to Washington. [Agreed!]
    "Never do they say that 'This 180 degree change from our
business-only strategy and this is why we need to do it,'" said
Christine Heckart, an industry analyst with TeleChoice.
    "Let's have it laid out -- let's have the strategy. There's
probably an excellent reason behind it -- but what is the
reason? I'm tired of speculating," Heckart said. [!Agreed!]
    Investors were also unhappy about the prospect of U S West
slowing Qwest's growth. U S West remains largely a stodgy local
phone company with unionized employees, old infrastructure and
a mediocre reputation for customer service, analysts said. [AGREED!]
    Frontier, meanwhile, has a national fiber optic network
that was constructed by Qwest and lies along side Qwest's own
network. Some analysts criticized Qwest for seeking to buy back
assets -- for a much higher price -- that it sold to Frontier
just a few years ago. [!AGREED!]
    One investor suggested Qwest's bid for Frontier was largely
an offensive move to prevent Global Crossing, which has
undersea fiber optic networks, from gaining a land-based
network in the U.S. "But that's a lot of money just to screw
over your rival," said one investor who declined to be named. [Hormones!]

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