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Monday, June 14, 1999 Published at 13:10 GMT 14:10 UK

Business: The Company File

Bidding war for US telecoms

US phone wars are heating up

Qwest Communications International has made a surprise $55bn cash and stock offer to buy Baby Bell US West and Frontier Corp in a move that would allow it to challenge leaders in the countrys telecoms industry.

Qwest said it has bid for US West and Frontier in separate transactions for a total of $55bn in cash and equity and $11.4bn in assumed debt.

If successful, Qwest would scupper plans by the ambitious Bermuda-based telecoms newcomer Global Crossing, which was hoping to merge with US West creating a company valued at $75bn.

Global Crossing was also holding talks with Frontier about a possible merger.

Qwest's offer for US West represents a 25% premium over the original value of Global Crossing's bid and its offer for Frontier is 19% higher than Global Crossing's.

Denver-based US West is the smallest of the five remaining Baby Bells, which were created by the break up of the old AT&T.

Qwest said it would pay up to $80 per share in its common stock for US West and $20 per share in cash and $55 per share in stock for long-distance provider Frontier.

If accepted, the deals with US West and Frontier would give America's fourth-largest long distance company a piece of the local phone markets in 14 western states, strengthen Qwest's long distance business and give it its strongest chance yet of challenging the likes of AT&T and MCI WorldCom.

"We've been looking into the type of companies that could help Qwest fulfil its mission, which is to deploy worldwide broadband and Internet capabilities. What these two companies bring to us is customers ... local access, cash flow and other assests we could leverage," said Qwest's President Afshin Mohebbi.

Analysts say Qwest and Global Crossing, both Wall Street favourites with high-flying stocks, have the ability to raise their bids if necessary.

US West said its board of directors will review Qwest's offer but the company declined to comment further.

Frontier issued a statement late on Sunday acknowledging it had received the unsolicited offer and said it was reviewing the materials, adding it will "take the necessary time to determine the best course of action for Frontier and its shareholders."

Qwest's unsolicited offers for US West and Frontier marks the second hostile takeover bid launched this year in the American telecommunications industry.

AT&T, the largest US phone company, recently won its battle to buy cable television company MediaOne, wresting it away from Comcast.

In that deal, Comcast agreed to back down only after getting several lucrative cable assets from AT&T.

Analysts say a similar scenario could be played out in the US West/Frontier battle - with Qwest and Global Crossing reaching a compromise and separating the assets they want most.

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