Qwest Communications International - Swallowed Us West In Hostile Takeover, 1999-2000

SWALLOWED US WEST IN HOSTILE TAKEOVER (1999-2000)

In mid-1999 Qwest announced hostile takeover bids for US West, a RBOC with local phone customers in 14 Western states, and Frontier Communications, the fifth-largest U.S. long-distance carrier. At the time, US West was already the subject of a $52 billion takeover proposal from Global Crossing Ltd., a Bermuda-based company that was building an undersea fiber-optic network. Wall Street reacted to the announcement by driving Qwest's stock down more than 20 percent. At first, US West rejected Qwest's bid, but following some negotiations Qwest and US West reached an agreement whereby Qwest would acquire US West for an amount estimated between $35 and $80 billion, according to various sources. Qwest's acquisition of US West also had the effect of diluting Bell South's interest in the new company from 10 percent to about 3.5 percent. Qwest subsequently withdrew its offer for Frontier, and Frontier agreed to be acquired by Global Crossing for $10.9 billion.

Qwest's acquisition of US West had to pass several regulatory hurdles, including approval from the U.S. Department of Justice, the Federal Trade Commission, the Federal Communications Commission, and public service commissions in seven of the 14 states served by US West. By July 2000 the merger with US West had received the necessary approvals. In many cases state approval was gained by agreeing to negotiate new service quality standards. The new company dropped the US West name and continued using the Qwest name. Altogether, the merged companies had about 70,000 employees worldwide. Later in the year Qwest announced it would streamline its workforce by cutting about 11,000 employee positions and 1,800 contractor positions by the end of 2001.

With the acquisition of US West complete, Qwest announced it would make quality of service its top priority for the local telephone customers it had gained. Other announced goals included doubling its DSL users from 250,000 to 500,000; doubling the number of wireless users from 800,000 to 1.6 million; and doubling its Web-hosting space, all by the end of 2001. The company also planned to improve access to its network in order to be able to re-enter the long-distance market again in the 14 western states formerly served by US West.