The Federal Communications Commission gave final approval to Qwest Communications International Inc.’s acquisition of U S West Inc. after Qwest agreed to sell off its long-distance business serving a 14-state territory where U S West also operates local telephone service.
The FCC said the sale of approximately $193 million in assets and service to Touch America Inc., a unit of Montana Power Co., met its requirements to close the deal. Federal law bars U S West from selling long-distance service in its region until it proves its local phone market is open to competitors. Those rules will transfer to Qwest when the merger is complete.
“We appreciate the FCC’s prompt and careful review of our divestiture plan,” said Steve Davis, senior vice president of government affairs for Qwest, in a statement. “We regret that federal law requires us to sell this business in order to complete our merger. However, Touch America is an experienced company that will provide excellent service to our customers.”
The $47.6 billion merger is expected to close on or around July 5, although all customers-approximately 250,000 of them-must be transferred to Touch America’s network before the deal can officially close, Qwest said.
The Arizona Corporation Commission, which regulates U S West in that state, also must issue a final approval order. The commission approved the merger June 23 but amended the order last Wednesday.
Matt Barkett, spokesman for Qwest, declined to comment on the actual closure date of the transaction. Last Friday, however, several U S West executives moved out of their offices to make room for incoming Qwest employees. Most U S West employees still don’t know yet if they will keep their jobs.
The impact of the merger on U S West Wireless remains to be seen. U S West failed to return requests for comment by RCR press time, and Qwest’s Barkett would not comment specifically on the future of U S West Wireless because of the merger’s pending closure.
“In previous public forums, we’ve said that we intend to expand the wireless business,” said Barkett.
There has been speculation by some analysts that SBC Communications Inc. and BellSouth Corp. possibly are looking to purchase U S West’s wireless footprint to fill out its own coverage gaps.
Elliott Hamilton, senior vice president and director of global wireless and broadband for The Strategis Group, Washington, D.C., said he was not aware of such plans, but he did note that “U S West is bucking the trend as far as not having a nationwide network.”
The Denver-based telecommunications company has about 600,000 wireless customers.
Share prices of both companies reacted positively immediately following the FCC announcement. Qwest shares were trading at $52.56 last Monday, up 19 cents from the previous trading day’s close, and U S West shares were trading at $90.25, up $1.16. At RCR press time, however, Qwest shares had fallen to $48.81 and U S West was trading at $84.44.
