Feds give final green light to US West-Qwest merger

A pair of regulatory decisions finally clear the way in what will be the first functioning link-up between a major local and a long-distance phone company.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
A pair of regulatory decisions have finally cleared the way today for telecommunications giants US West and Qwest Communications International to merge.

The Federal Communications Commission (FCC) today approved Qwest's plan to sell its long-distance business inside US West's 14-state territory to Touch America. Late last week, Arizona state regulators gave their own green light to the deal, marking the last of the necessary state approvals.

"We appreciate the FCC's prompt and careful review of our divestiture plan," said Steve Davis, senior vice president of government affairs for Qwest. "We regret that federal law requires us to sell this business in order to complete our merger. However, Touch America is an experienced company that will provide excellent service to our customers."

The US West-Qwest deal has been one of the rockiest mergers in recent corporate history, with periodic flares of temper on the part of executives who at times called into question the deal's viability.

But once all the final t's are crossed, the new company will be the first functioning link-up between a major local and long-distance phone company.

"It's been less than a year since we announced this merger, and we're poised to be able to deliver its benefits to customers," said US West chief executive Sol Trujillo, in response to the Arizona approval. "Completion of this merger will realize the vision we had to create a broadband communications powerhouse."

The new company will merge Qwest's sprawling long-distance fiber-optics business with US West's 14-state local phone networks. The two companies are focusing most tightly on the high-speed Internet business, in which US West has maintained an innovative place in the industry.

Already US West is offering high-speed service outside its own territory in a few places and hopes to use the Qwest deal as a springboard to the rest of the country.

But it will be a very different US West that ultimately finds its niche underneath the Qwest corporate banner.

In the course of the merger approval, Qwest CEO Joe Nacchio and Trujillo locked horns over their ideas for the future of the companies, resulting in painful and public disputes. The worst moments came when a third party--widely rumored to have been Deutsche Telekom--jumped into the fray with a tentative offer to buy or merge with Qwest.

These negotiations were played out in part in the headlines, as US West executives publicly expressed their displeasure at being shut out of the initial bargaining table, and Nacchio later excoriated Trujillo and his co-workers for driving the buyer away.

"This was probably one of the most bizarre set of circumstances in any series of acquisitions that I've been involved in," Nacchio told reporters following that flare-up.

Since that time, senior US West executives already have begun streaming out the doors. Trujillo himself has said he will stay until the merger is complete, but not much longer.

While all federal and state approvals for the merger are now in place, the two companies have a little more work to do in order to merge their stock tickers on Wall Street. The final closure of the deal is expected by midsummer or before, the company said.