Qwest Says Prospective Partner Terminated Talks

STOCKHOLM (03/10/2000) - Qwest Communications International Inc. late yesterday announced that a "major telecommunications company" -- widely rumored to be Deutsche Telekom AG -- had decided to withdraw from talks about acquiring Qwest and its merger partner US West Inc.

In a brief, tersely formulated statement, Qwest said the prospective buyer had decided to pull out of the deal, based in part on statements made by US West in a press release earlier yesterday.

In its statement, US West said that it would only consider any additional transaction, on top of its current merger agreement with Qwest, if it would create value for and be in the best interests of all shareholders of the combined company -- and not jeopardize or delay the completion of the pending US West-Qwest merger.

In addition, any subsequent business combination would also have to be better than or consistent with the pending deal with Qwest, Al Spies, US West's vice president and chief financial officer said in the written statement.

Qwest, however, aired a sense of disappointment over the failure of the talks, and put the blame squarely with its current merger partner rather than the prospective buyer.

"We regret that US West apparently wouldn't even consider an alternative transaction involving a major telecommunications company and Qwest despite the possibility of greater value for US West shareholders," Joseph Nacchio, chairman and chief executive officer of Qwest said in the company's statement.

The prospective buyer was widely believed to be Deutsche Telekom, although none of the companies has confirmed that the German carrier indeed was the third party in the talks.

Published reports yesterday, however, suggested that the planned Deutsche Telekom-Qwest-US West deal, which according to one report was valued at around US$100 billion, was beginning to fall apart. [See "Reports Differ on Outcome of DT-Qwest Talks," March 9.]For Deutsche Telekom, Germany's largest telecommunications carrier, the failed talks marked the second major setback in the company's stated quest to expand through mergers and acquisitions.

Last year, the German carrier also failed in its efforts to merge with Italy's Telecom Italia SpA. [See "With Olivetti's Success, Whither Deutsche Telekom?," May 25, 1999.]Deutsche Telekom could not be reached for comment at press time.

Nevertheless, investors today seemed to shrug off the news that the latest merger talks had died. In late morning trading in Frankfurt, Deutsche Telekom shares were trading at 96.50 euros (US$93.30), up 2.5 euros, or nearly 2.7 percent, from today's opening price.

Deutsche Telekom, in Bonn, can be reached at +49-228-181-4949, or via the Web at http://www.telekom.de. Qwest, in Denver, Colorado, is at +1-303-291-1400, or at http://www.qwest.com. US West, also in Denver, is at +1-303-896-5528, or at http://www.uswest.com/.

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