BellSouth ponders Qwest acquisition

BellSouth Corp. (NYSE: BLS) said in a regulatory filing that it was interested in acquiring Qwest Communications International (Nasdaq: QWST). Qwest shares jumped 2 to 15/16 to 46 1/4 in early trading.

BellSouth agreed to buy 10 percent of Qwest for $3.5 billion in April and recently sealed the deal. BellSouth, which has been notably absent from the consolidation among Baby Bells, has bet its growth on expansion in Latin America. Buying Qwest would certainly rev up BellSouth's growth potential.

USWest (NYSE: USW) recently agreed to merge with Global Crossing (Nasdaq: GLBX).

In a filing with the Securities and Exchange Commission, BellSouth said it "has considered and continues to explore various alternatives relating to BellSouth's interest in the company (Qwest), including transactions which may result in the acquisition of a control position in or combination with the company."

Neither company was commenting this morning. Qwest is scheduled to present at a PaineWebber investment conference Wednesday in New York.

In the filing, BellSouth said it was working with Qwest to explore the possibilities. Baby Bells by law aren't allowed to own more than 10 percent of a long-distance carrier, but the Bells are lobbying hard to provide long-distance service. BellSouth, through its filing, appears to be positioning itself in case the market opens up.

BellSouth also said in the filing it has the option to purchase an another 10 percent stake in Qwest if BellSouth gains permission to offer long distance.

It's not clear whether BellSouth shareholders would go for such an acquisition. BellSouth, like other Baby Bells, is viewed as a relatively safe haven. Qwest has a market capitalization of $30 billion and is known as a high-flyer.

Qwest, headed by former AT&T President Joseph P. Nacchio.