Copyright 1999 The Denver Post Corporation
The
Denver Post
June 10, 1999 Thursday 2D EDITION
SECTION: BUSINESS; Pg. C-01
LENGTH: 640 words
HEADLINE: In
Qwest of a relationship BellSouth details possible merger
BYLINE: By Leyla Kokmen, Denver Post Business Writer
BODY:
In unusual detail, BellSouth Corp. outlined
the rules of its relationship with Qwest Communications International Inc. in a
federal filing that says the Baby Bell may eventually buy the Denver company.
The document, filed with the Securities and Exchange Commission this
week, comes after the two companies last month completed BellSouth's purchase of
a 10 percent stake in Qwest. That deal, announced in April, also gave BellSouth
the option of raising its stake in Qwest to 20 percent if regulators allow it to
offer long-distance service in all of its nine-state region. A Baby Bell must
open its region to local competition before it can offer long-distance service,
according to the Telecommunications Act of 1996. The Baby Bells
must accomplish that before they are allowed to own more than 10 percent of any
long-distance company.
However, more and more Baby Bells are merging
with long-distance and data communications companies, often pushing the limits
of today's regulations.
For example, US West, the Denver Baby Bell, and
Global Crossing, the Bermuda-based startup communications company, are planning
a $ 37 billion merger that will face regulatory hurdles before US West can offer
its customers one-stop shopping for local and long-distance phone service.
BellSouth's filing said the company "has considered and continues to
explore various alternatives relating to BellSouth's
interest in (Qwest), including transactions which may result in the acquisition
of a control position in, or combination with the company."
While the
companies said in April that they would look into further developing their
alliance, the SEC document describes the relationship between the two companies
and details how and when the courtship could get more serious.
Both
companies downplayed the filing and declined to comment on the possibility of an
acquisition.
Analysts said it's uncertain whether BellSouth could buy
Qwest unless federal regulations change. By filing details of their
relationship, the companies may be trying to find out how feasible such a deal
would be.
"BellSouth may be sending out a test balloon to see what kind
of reaction it gets," said Boyd Peterson, a telecommunications analyst at the
Yankee Group, a Boston research firm. The company may also be showing
shareholders its future intent. "You're basically charting a possible course.
You can value the companies on that potential."
In a time of merger
mania among telecommunications companies, analysts speculate that Qwest is
looking to join with a major phone company to become a supercarrier. Brian
Adamik, senior vice president of the Yankee Group, expects over the next few
years to see five to seven of those supercarriers, which combine
state-of-the-art data communications technology with traditional local and
long-distance phone service. A combined Qwest and BellSouth would fall into that
category.
The merged company would be able to capitalize on the national
18,500-mile high-speed, high-capacity fiber-optic network Qwest has almost
completed - and tap into business and international markets, Adamik said.
But Adamik still questions who would control the combined company and
what role Qwest's charismatic CEO Joseph Nacchio would have.
The SEC
filing says that BellSouth will be able to place a member on Qwest's board of
directors once the phone company has received permission to offer long-distance
service in five states. It also prevents BellSouth from attempting a hostile
takeover of Qwest unless the Denver company seriously entertains offers from
other companies.
Qwest stock rose $ 3.688 to close at $ 47 Wednesday.
BellSouth stock fell $ 0.063 to close at $ 46.063. TAKING STOCK
BellSouth Corp. (BLS, NYSE) $ 46.063, down 6 cents Qwest
Communications International (QWST, Nasdaq) $ 47, up $ 3.688
LOAD-DATE: June 10, 1999 
