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Technology Stocks : Qwest Communications (Q) (formerly QWST) -- Ignore unavailable to you. Want to Upgrade?

To: Harry J. who wrote (5238)	10/11/1999 6:14:00 PM
From: KAF	Read Replies (2) \| Respond to of 6846

The following report was aired Monday on CNBC by reporter David Faber: " It is not a surprise that BellSouth is now being viewed as a rumored suitor for Qwest Communications. The company finally showed it is at least willing to compete for a big prize, although it did lose its brief but heated battle with MCI WorldCom for control of Sprint. It already owns 10% of Qwest, and it has an agreement in place to market that company's services to its own customers. And even though it was boilerplate language in its filing when it bought that 10% stake in Qwest, BellSouth did admit that it had considered buying all of Qwest. On thing, sources tell me, it never did was make a full-fledged offer for the company despite what may have been the hopes of Qwest founder Phil Anschutz that it would. BellSouth's reluctance to bid had previously been chalked up to, among other things, regulatory concerns. But given its willingness to go after Sprint despite a law against its entry into long distance, such regulatory concerns don't seem to be at issue now. So the question remains whether the Sprint bid represented a true change in strategy that could result in BellSouth biding for Qwest. BellSouth is the only Baby Bell not to have completed a transforming acquisition in the U.S. since it was spun off from Ma Bell. A spokesman says BellSouth has never had an aversion to doing a large acquisition, but has consistently told investors it will only do so when it finds an opportunity that it believes will enhance shareholder value. Sprint represented such an opportunity. The spokesman says the company has ultimately had at least a look at most of the major properties that have come up for sale in the telecom world, but until Sprint, it decided against mounting a bid for any of them. Qwest, as a provider of long-distance voice and data services, is somewhat similar to Sprint. The BellSouth spokesman said the company is happy with its 10% stake in Qwest and the accompanying marketing agreement between the two companies. BellSouth inked that deal last April, spending about $3.5 billion to buy that 10% stake, paying $47.25 a share. The spokesman declined comment on any rumors involving BellSouth's acquisition plans. But sources close to both companies tell me that, while it has no proposed deal, BellSouth is still thinking about bidding for Qwest, and it has not yet in anyway I've heard, at least, made any sort of offer. However, my sources tell me BellSouth does not want to own U.S. West, which Qwest, of course, is slated to merge with. So if BellSouth did decide to try and buy Qwest without U.S. West, it would have to move very quickly. Qwest has a Nov. 2 shareholder vote on that deal. If BellSouth bids in the next two weeks, it would give Joe Nacchio, the CEO of Qwest, time to take the offer to the board and perhaps redirect his company's strategy as well. If the board liked the deal, it could withdraw its support for the U.S. West deal, although it couldn't terminate it. It would still need to go to a vote of its shareholders for it to be terminated. Qwest's 39% owner Phil Anschutz, well, he is contracted to vote in favor of a U.S. West deal. And that would require that BellSouth will almost all of the remaining 61% of the shares. Now it owns 10% so BellSouth would have to carry about 80% of the votes cast aside from Anschutz's holdings. And either way, BellSouth would be forced to pay U.S. West its $80 million breakup fee. This is already wreaking havoc on some arbs. They are short Qwest stock and long U.S. West. That hurts when you're doing that arbitrage, as Qwest goes up on speculation and U.S. West goes down. That's pain already being felt despite what is only speculation."