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Anschutz shedding Qwest
More sales of stock lead to questions about confidence in telco
By Jeff Smith
Rocky Mountain News
Tuesday, January 16, 2007

Philip Anschutz, Qwest founder and once the Denver telco's largest investor, has now sold more than 90 percent of his holdings in the company.  Anschutz resigned from the Denver telco's board last spring, and since then has been shedding stock.  The latest deal was last week.

He has grossed $1.4 billion from the sales, including $297.3 million in last week's transaction.  Because of the way the sales are structured, he could get more if Qwest shares rise in the next few years.

The transactions have at least one analyst raising questions about what the sales say about Anschutz's confidence in Qwest's future.

Last week's sale sparked additional speculation because it came amid a deal to pay David Beckham a reported $250 million over five years to play for Anschutz's Los Angeles Galaxy soccer team.

Anschutz spokesman Jim Monaghan dismissed the view that the Qwest stock sale will be used to cover the Beckham contract.

"I don't know how you can link (the two)," Monaghan said, noting that Beckham's contract is said to be performance-based and to be paid out of future team revenues.

Monaghan has stressed repeatedly that Anschutz runs an investment company with broad interests -- and in recent years that has meant professional soccer, movie production, entertainment complexes and free daily newspapers in selected cities.

For Anschutz, Qwest has receded to the back burner in terms of time and focus.

And that's part of a pattern.  Anschutz started in oil and gas, moved to railroads, and then, in the 1990s, transformed a Southern Pacific Railroad subsidiary into a nationwide fiber-optic company called Qwest Communications.

Monaghan said Anschutz still owns some Qwest stock.  He said Qwest stockholders should take the sales of the past year as a positive because they are structured so Anschutz shares in Qwest stock-price growth during the period of the "forward sales" contracts.

Anschutz also retains voting rights until the shares are delivered at a time specified in the contracts. In last week's transaction, for example, Anschutz gets the $297.3 million as a prepayment, essentially receives 25 percent of the price appreciation, and the contracts are "settled" with the shares delivered to the buyers in 2010.

Donna Jaegers, a telecommunications analyst at Janco Partners in Greenwood Village, understands the argument that Anschutz is sharing in some of the price appreciation.  And maybe he can say he has better investment options outside of Qwest as well, she said.

"But it begs the question.  If he felt the stock would go significantly higher would he be selling at all?" Jaegers asked.  "It's hard to read between the lines, but it's certainly not a warm and fuzzy feeling.  It's certainly a yellow flag."

Qwest shares have soared to five-year highs in recent months, peaking at $9.22 last Sept. 7.  They closed at $8.45 last Friday, up 7 cents.

Qwest declined comment Monday on the Anschutz transactions.

Qwest's executive team also has been selling stock in recent months, netting more than $50 million by exercising low-priced stock options.

Qwest Chief Financial Officer Oren Shaffer said at a recent investor conference in New York that he had sold some stock for tax-planning reasons and that executives had issued an "unintended signal" to the marketplace.

"It has nothing at all (to do) with my view about the company.  I continue to be heavily invested in the company," Shaffer said.

Anschutz could have made more than $1.4 billion by selling the Qwest stock.  As part of his transactions since last spring, he donated 53.5 million shares currently worth more than $450 million to his charitable Anschutz Foundation.

But he also derives tax advantages from the forward sales contracts.  He's able to defer taxes because the sales aren't deemed complete until the contract settlement dates.

smithje@RockyMountainNews.com or 303-954-5155

http://www.rockymountainnews.com/drmn/other_business/article/0,2777,DRMN_23916_5281837,00.html