March 9, 6:30 am Qwest and LCI International $4.4 Billion Merger
Combined Entity To Become Fourth Largest Long-Distance Company
DENVER and MCLEAN, Va.--(BUSINESS WIRE)--March 9, 1998--Qwest Communications
International Inc. and LCI International, Inc. today announced the signing of a definitive merger
agreement. The merger will create the fourth-largest U.S. long distance company and one of the
fastest growing companies in the communications industry. The all-stock transaction is valued at
approximately $4.4 billion. The merger enables the LCI nationwide customer base to fully leverage
the capabilities and efficiencies of the Qwest Macro Capacity SM fiber network and allows Qwest to
take full advantage of LCI's sales and marketing expertise, distribution channels, intelligent network
platform, as well as the company's customer care and billing system. The combined companies had
1997 revenues of $2.3 billion, serve over two million business and residential customers and have a
total current equity market capitalization of over $11 billion. (See attached fact sheet for further
detail.)
The board of directors of each company have approved the merger. The terms of the merger
agreement call for each LCI share to be converted into $42.00 of Qwest common stock, under
current market conditions. Based on the closing prices of Qwest and LCI on March 6, 1998, LCI
shareholders would receive approximately 122.4 million newly issued shares of Qwest stock, or
36.4 percent of the combined company's shares. The merger is intended to qualify as a tax-free
reorganization and will be accounted for as a purchase.
''Brian Thompson and the LCI team have built a world class communications company. Combining
their customer base and their highly competitive people with those at Qwest, and their state of the
art billing and customer care platforms with the Qwest network creates a powerful new company,''
said Joseph P. Nacchio, president and CEO of Qwest. ''Qwest's ability to sell next generation data
services is greatly enhanced by the LCI sales, marketing and distribution strengths. This merger
accelerates both Qwest's and LCI's business plans by several years.''
The combination of Qwest and LCI will result in significant operating and financial benefits. The
merger will deliver greater network efficiencies, eliminate duplicate efforts to build sales and
systems infrastructure, avoid duplication of capital spending programs and accelerate the
companies' data and international strategies.
''LCI has achieved a 40 percent average annual revenue growth rate over the last 5 years and is one
of the most successful and fastest growing telecommunications carriers in the U.S.,'' said H. Brian
Thompson, chairman and CEO of LCI. ''We anticipate that Qwest's technologically advanced
network will enable us to further accelerate our performance.''
An integration team composed of four senior executives from each company has been formed to
oversee the combination process to ensure that operational benefits are fully realized. LCI will
receive two seats on Qwest's board of directors, one of which will be filled by H. Brian Thompson,
who will become vice chairman of the board. Completion of the transaction is anticipated to occur
during the third quarter of 1998. The transaction is subject to the majority vote of the shareholders
of Qwest and LCI and to other customary conditions such as receipt of regulatory approvals. The
majority shareholder of Qwest has agreed to vote in favor of the transaction.
The actual number of shares of Qwest common stock to be exchanged for each LCI share will be
determined by dividing $42 by a 15-day volume weighted average of trading prices for Qwest
common stock prior to the closing, but will not be less than 1.0625 shares (if Qwest's average stock
price exceeds $39.53) or more than 1.5583 shares (if Qwest's average stock price is less than
$26.95). If Qwest's average stock price is less than $26.95, LCI may terminate the merger unless
Qwest then agrees to exchange for each share of LCI the number of Qwest shares determined by
dividing $42 by such average price.
The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 16,285 mile network will serve more than 125 cities, which represent
approximately 80% of the data and voice traffic originating in the United States, upon its scheduled
completion in the second quarter of 1999. Currently, more than 3,600 miles are activated from Los
Angeles to Columbus, Ohio. Qwest is also extending its network 1,400 miles into Mexico with
completion slated for late third quarter 1998.
The Qwest Macro Capacity Fiber network is designed with a highly reliable and secure
bi-directional, line switching OC-192 SONET ring architecture. Upon completion, the network will
offer a self-healing system that provides the ultimate security and reliability by allowing
instantaneous rerouting in the event of a fiber cut or equipment failure.
About LCI International
LCI International, Inc. (NYSE:LCI - news), one of the nation's fastest-growing long-distance
telecommunications carriers, provides a full array of worldwide voice and data transmission
services to businesses, residential customers and other carriers through its 4,500 mile fiber-optic
network which is planned to be 8,500 miles by the end of the year. LCI International, Inc. is
headquartered in McLean, VA, with offices in more than 60 locations, including national network
control and customer service centers, and regional operations in various locations throughout the
United States.
About Qwest
Qwest Communications International Inc. (NASDAQ:QWST - news) is a multimedia
communications company building a high-capacity, fiber optic network for the 21st century. With
its cutting-edge technology, Qwest will deliver high-quality data, video and voice connectivity
securely and reliably to businesses, consumers and other communications service providers. Further
information is available at www.qwest.net.
Lehman Brothers Inc. acted as financial advisor to LCI and Salomon Smith Barney acted as
financial advisor to Qwest.
This release, including the attached merger fact sheet, may contain forward-looking statements that
involve risks and uncertainties. These statements may differ materially from actual future events or
results. Readers are referred to the documents filed by Qwest with the SEC, specifically its most
recent reports on Form 10-Q, which identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including potential fluctuations in
quarterly results, dependence on new product development, delays in closing the transaction,
inability to achieve combination efficiencies, rapid technological and market change, failure to
complete the network on schedule, volatility of stock price, financial risk management and future
growth subject to risks.
This announcement is not an offer to sell or a solicitation to buy any securities of Qwest. The
offering with respect to the proposed merger with LCI will be made only by the proxy
statement/prospectus that will be distributed to stockholders of LCI in connection with their
consideration of the transaction.
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Note to Editors: QwestLinked is a trademark, and the Qwest logo is a registered trademark of
Qwest Communications International Inc. in the U.S. and certain other countries.
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Qwest Communications
LCI International
Merger Fact Sheet
Creates fourth largest long-distance company, as measured by revenues.
(assuming Worldcom and MCI merger is consummated.)
Combined market capitalization exceeds $11 billion, at March 6th
trading prices.
More fully utilizes Qwest's 16,000 mile Macro Capacity SM fiber
network.
Combined employee base will be approximately 5,800 (1,800 Qwest and
4,000 LCI).
Combined customer base will be approximately 2.3 million.
Combines the industry's most seasoned and entrepreneurial management
teams.
The combined companies will operate in over 70 U.S. locations (10
Qwest, 60+ LCI), including major operations in Denver, Colorado,
Northern Virginia, Columbus, Ohio and San Antonio, Texas
Qwest's headquarters will remain in Denver, CO.
Operating synergies will be significant in all areas of operations.
Revenues
Network Facility Costs
Sales and Marketing
Network Engineering and Operations
Information Technology
Other Administration and Corporate
Total cost synergies for the first full year post-combination are
estimated to exceed $300 million and exceed $1 billion for 1998
through 2001.
Capital expenditure synergies are estimated to be approximately $80
million in 1999 and exceed $285 million for 1998 through 2001.
Presentation includes forward-looking statements. Actual results
may vary.
Key 1997 Operating Data:
Qwest LCI Combined
Revenues
Communications services $115.3 $1,642.0 $1,757.3
Construction services $581.4 $0.0 $581.4
Total Revenues $696.7 $1,642.0 $2,338.7
Revenue Growth ('97 v. '96) 202% 26%
Ebitda(a) $115.2 $194.0 $309.2
Ebitda Growth(a)
('97 v. '96) 507% 29%
(a) Adjusted for Qwest
Growth Shares
Net Income(b) $14.5 $97.0 $111.5
Net Income Growth(b)
('97 v. '96) 308% 30%
(b) Adjusted for LCI
non-recurring charges
Total Assets $1,390.0 $1,354.0 $2,744.0
Minutes of Use 669.2 12,903.0 13,572.2
Minutes of Use Growth
('97 v. '96) 75% 35%
Post Acquisition Stock Ownership:
36.4% LCI pro forma ownership of combined entity based on March 6,
1998 closing stock price.
Contact:
Qwest Media Contact:
Alexander Communications
Erin McKelvey, 303/615-5070 ext.108
emckelve@alexander-pr.com
or
Qwest Investor Contact:
Qwest Communications
Lee Wolfe, 800/567-7296
lwolfe@qwest.net
qwest.net
or
LCI Media Contact:
LCI International
Gerry Simone, 703/848-4478
simoneg@lci.com
lci.com
or
LCI Investor Contact:
LCI International
Kevin Taback, 703/848-4493
tabackk@lci.com
lci.com |
