Debt-Ridden Qwest May Be In Acquisition Talks

Qwest Communications, the smallest of the old Baby Bells, may be interested in selling its crown jewel, its nationwide fiber-optic network.

Investment banking and telecommunications analysts are speculating that Qwest could be acquired as the Denver-based company struggles under a heavy debt load. Qwest doesn't have its own wireless operation; Verizon Wireless provides its mobile phone service. The wireless operations at Verizon and AT&T have been their chief profit drivers.

While Qwest has remained mum on the reports, it did report Thursday that it was laying off an unspecified number of workers in its business markets group, which is centered around its fiber-optic network. "The reductions were focused on areas where we determined we could become more efficient, but we are not disclosing specifics," a Qwest official said.

UBS telecommunications analyst John Hodulik, who has followed Qwest closely, has suggested a list of possible acquirers, according to media reports. They include CenturyTel, Frontier Communications, and Windstream Communications. If Qwest is successful in selling off its fiber-optic networks -- for between $2 billion and $3 billion, as rumored -- it would primarily be left with its shrinking landline base in its sprawling, mostly rural 14-state region.

Qwest reported $3.3 billion for the quarter. Verizon Communications and AT&T reported fourth-quarter revenue of $24.6 billion and $31.1 billion, respectively.

In recent financial filings, Qwest said it has cut 1,700 jobs and has decided to refrain from making cash contributions to the company's pension plan this year. The company recently reported that it has nearly $14 billion in debt and $575 million in cash.

There were more than 10 regional Bell operating companies formed after the breakup of the old AT&T more than two decades ago. After a series of mergers and acquisitions over the years, a reconstituted AT&T and Verizon Communications have come to dominate the U.S. telecommunications industry.

Faced with its particular challenges, Qwest has nevertheless delivered improved financial reports. Its chairman and CEO Edward Mueller reported in February that profits were strong and its business markets division boosted its profits 4.4% in the fourth quarter compared with the previous year's like quarter.

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