Qwest's Long-Distance Arm Draws Bids Below Targets
By Amol Sharma
The Wall Street Journal
Friday, June 5, 2009
Preliminary bids for Qwest Communications International Inc.'s
long-distance business are coming in well below the $2 billion
to $3 billion it sought, leaving the telecommunications company
with the choice of calling off the auction or accepting a
Some parties have valued Qwest's long-haul network -- which
carries long-distance phone and data traffic and provides
advanced services for corporate and government customers -- at
under $1 billion, according to people familiar with the matter.
Among the most likely buyers for the network is Level 3
Communications Inc., which is formulating a potential bid, the
people said. XO Holdings Inc.'s XO Communications, which
is controlled by billionaire investor Carl Icahn, and TW Telecom
Inc. have also expressed interest, the people said.
A spokesman for Qwest declined to comment.
Qwest, the No. 3 U.S. phone company by subscribers, is shedding
landline phone customers and doesn't have its own wireless
network. It is delivering profits mainly through
aggressive cost cutting.
Chief Executive Edward A. Mueller could use proceeds from the
sale of the long-distance business to help pay down Qwest's
$13.3 billion in debt. He will now have to decide whether
to cancel the auction or settle for a sale at a significant
discount from the valuation he had originally hoped to get.
Finding a value for Qwest's assets has been difficult for
potential buyers, since the company doesn't break out its
revenue by long-distance network versus local-access network.
Level 3 Communications, considered by many in the industry as
the most logical buyer, could beef up its own nationwide
Internet backbone with Qwest's network and take on its
government and large business customers.
Large telecom companies such as AT&T Inc., Sprint Nextel Corp.
and Verizon Communications Inc. decided not to bid for Qwest's
assets, the people familiar with the situation said.
Qwest's long-distance business has struggled as an excess of
capacity of long-haul networks has led to a collapse in pricing.
Meanwhile, in its 14-state local access territory, Qwest is
facing increasing competition from cable providers.
Qwest's shares closed down 4.8% at $4.19 on the New York Stock
Bids for Qwest's network were due Monday, but the company
extended the process, the people said.
—Keith Winstein contributed to this article.
Write to Amol Sharma at