Less than a week after Qwest Communications International Inc. and U S West Inc. conquered a major regulatory hurdle in Minnesota regarding their pending merger, Qwest reported its first-quarter revenues increased 39 percent to $1.22 billion, compared with $878.4 million for the same quarter the previous year.
Qwest said it had net income of $12.6 million, or 2 cents per share, compared with net income of $4.8 million, or 1 cent per share, for first-quarter 1999.
Qwest’s volatile union with U S West most recently was shaken by Qwest’s move to merge with Germany’s Deutsche Telekom AG. U S West shareholders threatened to sue Qwest if it proceeded with the deal, and soon after, DT backed out of the negotiations.
DT continues to actively pursue a piece of the U.S. telecom market, and Ron Sommer, chairman of DT, stressed the company is looking for an acquisition, “not simply a loose alliance.”
If and when the merger is completed, Sol Trujillo, chief executive officer of U S West, commented the company must become a bigger presence in the wireless arena.
Verizon Wireless, comprised of the recently merged U.S. wireless assets of Bell Atlantic Corp., Vodafone AirTouch plc and PrimeCo Personal Communications L.P., boasts more than 24 million customers, raising the bar for wireless carriers whose footprints are limited to certain regions of the country. Trujillo said the company will need to grow by joining with partners and establishing a nationwide network, although he did not name potential partners.
On April 14, Minnesota’s Department of Commerce and Office of the Attorney General both agreed to a settlement with the Denver-based telecom companies, advancing the merger one step closer to completion.
The blessing of the Minnesota agencies means the state’s public utilities commission, which in March delayed the case by sending it to an administrative law judge, now must accept the agreement.
However, Minnesota, as well as Arizona, Montana, Washington, Wyoming and Utah, still must grant regulatory approval. Both Qwest and U S West said they don’t expect this to happen until fall, several months after the previously anticipated July closing date.
“I’m guardedly optimistic this deal is on track,” said Joseph Naccio, Qwest’s CEO, during an April 19 conference call announcing the company’s first-quarter earnings.
The negotiated agreement with the Minnesota agencies provides that Qwest and U S West will:
Invest about $40 million a year for four years to improve the network and hire more technicians and call center employees.
Deploy advanced broadband services to at least 13 Minnesota cities outside Minneapolis/St. Paul during next three years.
Pay customers bill credits of $15 million to $50 million per year, in addition to the maximum $30 million in annual penalties on the books now.
Triple customer refunds if they fail to meet certain service requirements within a set amount of time.
