Making the brashest telecommunications move in years, Qwest Communications International Inc., a young, high-flying communications carrier, said yesterday that it was making a hostile $55 billion bid to acquire US West Inc., the old local phone giant, and Frontier Corp., one of the nation's biggest long-distance companies.
Qwest is trying to take US West and Frontier, formerly Rochester Telephone, from one of its main rivals, Global Crossing Ltd. of Bermuda. Like Qwest, Global Crossing has built a billion-dollar business in recent years by exploiting the surging worldwide demand for electronic communications.
Last month, US West agreed to merge with Global Crossing in a stock deal that the company valued at $37 billion. Frontier agreed to be acquired by Global Crossing in March for $10.8 billion in stock. Now Qwest wants to win them both.
The Global Crossing-Qwest showdown is the latest bombshell in the telecommunications business, which has come to resemble the railroad and steel industries of a century ago in its dashes for assets and market share. For consumers, the whirlwind means that the companies that deliver their communications links with the world are changing faces as they try to offer integrated bundles of telephone and Internet services.
"With the proposed acquisitions of US West and Frontier, we take the next logical step in accelerating our delivery of Internet-based, broadband communications services to customers," said Joseph P. Nacchio, chairman and chief executive of Qwest. In a statement, he said the proposed deal would create an "Internet communications powerhouse."
Like the last big communications takeover fight, Worldcom's $36.5 billion victory over British Telecommunications and GTE in 1997 to acquire No. 2 long-distance carrier MCI Communications, this latest fight underscores the power of young, fast-moving companies in the face of more sluggish seniors.
The Qwest offer is a sign that deregulation and the growth of the Internet are accelerating the pace in the telecommunications business. Worldcom got its start in the 1980s and was considered an upstart when it went after MCI, but Qwest and Global Crossing did not exist three years ago.
Qwest is controlled by Philip Anschutz, the reclusive Denver tycoon, and emerged from Anschutz's takeover of the Southern Pacific Railroad in 1988. Qwest has used rights of way from the railroad and others to build an advanced nationwide fiber-optic communications network.
Global Crossing was founded a few years ago by Gary Winnick, formerly an associate of junk-bond financier Michael Milken at Drexel Burnham Lambert, and is building an international undersea fiber-optic communications system.
Both companies have raised billions of dollars from investors based on their founders' financial pedigrees and on their ambitious business plans.
The most valuable communications asset in the world probably remains the copper telephone wires that enter almost every American home. US West, which emerged from the breakup of AT&T; in 1984, controls millions of those wires.
Pub Date: 6/14/99