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Qwest blasts US West for nixing DT takeover

By Jack McCarthy
IDG News Service, 03/13/00

The proposed merger of Qwest Communications and US West will succeed, despite frustrations unleashed in the breakdown of acquisition talks with Deutsche Telecom AG, the partners said Friday.

In the aftermath of statements by US West that led to the withdrawal of an acquisition bid by Deutsche Telecom, Qwest Chairman and CEO Joseph Nacchio, discussing the matter with reporters Friday, could barely hold back his frustration. However, Nacchio still endorsed the merger and said he expected it to go through to completion.

US West released a statement yesterday saying it would consider an additional transaction with an unnamed company if additional value would be created for shareholders, and if the completion of the US West/Qwest merger would not be undermined. None of the parties would identity Deutsche Telecom as the company that offered the takeover package, but the German carrier has been named in numerous press reports in recent days.

Nacchio said US West made a mistake in publicly questioning the offer. "If it was a tactic, it was not a shrewd tactic and it blew up in their face," Nacchio said in a teleconference. He added: "It's unfortunate for all shareholders that the opportunity has been missed."

Published reports said the Deutsche Telecom offer was valued at $100 billion, as Deutsche Telecom looks to expand its telecom operations in the U.S.

Despite what he saw as a lost opportunity, Nacchio said he expects the merger to be completed. To that end, he announced approval of the merger Friday by the Federal Trade Commission. The approval remains subject to Qwest's divestiture of its long-distance services in 14 states now served by US West.

"The reason for the US West merger has not changed," Nacchio said. "We expect to fulfill our obligations, and them to fulfill theirs as well."

US West also said it would continue to focus on the merger. "Whether there is a buyer or not, we continue to remain committed to the Qwest merger proceeding and closing under the current arrangement," US West spokesman Dave Banks said in a telephone interview.

One analyst said US West appeared to be protecting the merger with Qwest by going public with reservations about the Deutsche Telecom offer, which might have overshadowed US West. "They may have been afraid that if Qwest struck a deal with Deutsche Telecom, their deal would be off," said Van Baker, an analyst with the Gartner Group.

Deutsche Telecom could still resubmit an offer after the Qwest/US West merger is completed, he noted.

Deutsche Telekom can be reached at 49-228-181-4949, or at www.telekom.de/. Qwest is at 303-291-1400, or at www.qwest.com/. US West is at 303-896-5528, or at www.uswest.com/.