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Merger buoys Qwest stock
Proposed AT&T-BellSouth deal stirs interest in company's prospects.  Qwest could court phone companies outside its region, experts say.  Meanwhile, Verizon states it won't pursue Qwest.
By Beth Potter, Staff Writer
Denver Post
Tuesday, March 7, 2006

Qwest's stock hit a nearly four-year high Monday, up 3.8 percent after AT&T's announcement Sunday that it plans to buy BellSouth for more than $67 billion.

Oren Shaffer, Qwest's chief financial officer, told investors at a Florida conference Monday that Qwest is trying to make its business as valuable as possible - and looking to buy a company that will help it grow.

"Let's continue to look at these, any acquisition opportunities that might come up," Shaffer said. "They have to be obviously very value-accretive, and we just as obviously don't seem to have cracked the puzzle, because we have been looking and we haven't done anything yet."

Along with chief executive Richard Notebaert, Shaffer has been instrumental in bringing the 14-state telephone company back from near bankruptcy in 2002, when its stock traded at a little more than $1 per share. Qwest stock closed at $6.84 Monday.

Financial message boards on the Internet lit up with speculation about Qwest.  "We're going to $10 and beyond," wrote one commentator.

But it is unclear what company, if any, Qwest might partner with in an industry of consolidating giants.  Qwest's market capitalization is $12.8 billion, compared with $93 billion for Verizon and a projected $167 billion for a combined AT&T/BellSouth.

Qwest could make a play for phone companies outside of its 14-state region, said Bank of America analyst David Barden.

Other analysts have pointed to the spinoffs of local-phone units from Sprint Nextel Corp. and Alltel Corp. as possible Qwest acquisition targets.

Verizon tried to lay rumors to rest Monday that it would make a good Qwest suitor.

"Verizon's business plan remains unchanged, so we remain focused on integrating MCI and divesting our directories business," said spokesman Bill Kula.

Verizon also is seeking to buy the remaining 45 percent of its wireless company that is owned by Vodafone.

Qwest could lose out in an AT&T-BellSouth deal.  Qwest sells part of its network to BellSouth, which would likely transfer that traffic to AT&T, said UBS Bank analyst John Hodulik.

If the AT&T-BellSouth deal goes through, Qwest would lose about $200 million a year from BellSouth, or about 5 percent of its total wholesale revenue, he said.  "It could put a dent in Qwest's wholesale-revenue stream," he said.

Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.

STOCK PRICES

AT&T
$27.02
Down $0.97

BellSouth
$34.50
Up $3.04

Verizon
$33.73
Up $0.15

Qwest
$6.84
Up $0.25

http://www.denverpost.com/business/ci_3575559