Qwest CEO: US West actions "bizarre"

Angry at the collapse of merger talks with a "major telephone company," widely rumored to be D. Telekom, Qwest chief executive Joe Nacchio lashes out at current merger partner US West.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
The pending merger between Qwest Communications International and US West is looking more and more like an episode from the long-running Honeymooners television series.

Angry at the collapse of new merger talks with a "major telephone company," widely rumored to be Deutsche Telekom, Qwest chief executive Joe Nacchio lashed out at current merger partner US West today.

Calling the company's actions over the last few days "bizarre," Nacchio said a defensive press release sent yesterday by the local phone company was directly responsible for scaring off the merger partner.

"That US West press release was truly amazing," he told reporters on a conference call. "If it was a tactic, then it was not very shrewd negotiating, because it blew up in their face."

US West took a more restrained position in response to Nacchio's comments.

"We are trying to put together a new family," said US West spokesman David Fish. "All families have occasional squabbles. The point is to work them out and move on. And we're moving on."

Deutsche Telekom has never commented officially on the rumored merger talks.

The Nacchio comments are just the latest in a series of contentious developments that have put the two companies' attempts to merge operations on very shaky ground.

Qwest won US West's hand last July, after breaking up an earlier merger agreement between the "Baby Bell" phone company and fiber-optics network operator Global Crossing. But since that time, the management of the two companies have been at odds over strategic direction.

US West chief Solomon Trujillo said last week that he would resign after the merger was complete. For his part, Nacchio has been making increasingly lukewarm statements about his commitment to the merger, publicly airing his frustration at state regulators' complaints about US West's previous business practices.

The latest round of merger machinations--confirmed in the abstract by Qwest and believed to be Deutsche Telekom--brought the mutual frustrations to the forefront, however. US West was not consulted in the early round of discussions, and last week sent its own angry letter to Qwest threatening to sue if the new talks disrupted the pending merger process.

Last night, after see story: Mergers: How big is big enough?a week of simmering tension, US West released a statement that said "any subsequent business combination must also be better than or consistent with our existing transaction with Qwest."

A few hours later, Qwest said talks with the unnamed suitor had collapsed. US West's refusal to negotiate terms had torpedoed the discussions, Nacchio said today.

"The buyer left because of the response they received from US West," Nacchio said. "This was probably one of the most bizarre set of circumstances in any series of acquisitions that I've been involved in."

The incident has clearly left all the parties involved with a bad taste in their mouths. But that doesn't mean the merger is dead, Nacchio said--or at least not yet.

"We will continue to perform our obligations under the merger agreement, and we expect US West to do the same," Qwest's chief said. "We have good relationships with the operating people at US West. When you get below the policy level, I think the companies can work together."

The angry spat is taking place against a background of otherwise positive merger news.

Federal regulators said today they had approved the two companies' marriage, on the condition that Qwest sells off its long-distance business inside US West's 14-state service area. The local company is still barred by federal law from offering long-distance service until it proves it has opened its local market to competition from rivals.

Nacchio said that his company was in negotiations to sell those assets, and was nearing an agreement, though he refused to divulge a specific timetable.