US West, Global Crossing to merge in stock swap

The latest megamerger in the telecommunications industry promises to offer more voice- and data-network service options and perhaps more responsive service for large business customers, analysts said.

US West Inc in Denver, the smallest of the Baby Bells, announced it will merge with Global Crossing in Hamilton, Bermuda, in a stock swap worth more than $US37 billion.

For the merger to pass muster at the Federal Communications Commission, Global Crossing may need to sell off its long-distance voice and data business in US West's 14-state territory to preserve competition, analysts said.

Global Crossing is buying long-distance carrier Frontier Corp in New York, for $11 billion. Frontier has a small number of long-distance customers in the US West region.

User companies in US West's local-service area could get a "preferred provider" option for less-expensive long-distance service from Frontier under the deal, but the new entity couldn't require customers to use Frontier, said analyst Melanie Posey at IDC.

Analysts said the merger could beef up US West's service by giving it access to more cash and service technicians.

"It's pretty accurate to say US West doesn't get high marks for service. And they claim that's because they have such a geographically dispersed area, where it takes longer to do repairs and installs because technicians have to drive to the back of behind in Idaho," Posey said. "Maybe now, US West can throw more money and people at that problem."

Analyst Jeffrey Kagan in Atlanta said the deal exemplifies how start-ups in telecommunications are merging with established companies to bring new services and technologies to existing markets.

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