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Qwest blames US West for DT deal going west

Byzantine intrigues

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It's like the plot of an opera. Qwest has blamed US West for the breakdown of negotiations with "a major telecommunications company" (meaning Deutsche Telekom), while US West apparently rejected a DT bid as it would have brought about the breakup of US West and enabled DT to pay less for the company. US West threatened to sue Qwest if it agreed to be acquired by another company and did not go ahead with its stated intention of buying US West. Qwest said DT would have to satisfy US West's demands or it would not agree to be acquired. As a consequence, DT ended its attempt to buy Qwest. By one of those curious coincidences, the Federal Communications Commission voted 5-0 on Friday in approval of the previously proposed £36 billion acquisition of US West by Qwest, subject to some relatively minor regulatory issues - principally that Denver-based Qwest must divest itself of its long-distance customers in the 14-state area in which US West operates. Smoke signals went up that this would be done in double-quick time - perhaps even next month, for an anticipated $300 million. A possibly tougher regulatory requirement is to persuade all 14 states to approve the deal. Colorado and Washington have agreed, but there is apparently opposition in Minnesota. It is interesting to contemplate whether a deal with DT would have received federal and state regulatory approval, but now we shall never know. For Deutsche Telekom, still 65 percent-controlled by the foot-dragging German state, it was another failure in its desire to spend German taxpayers' money in its attempt to become a global telecom player. At least DT managed to double its share price over the last year, despite its earnings going down 45 percent. It still faces the problem of increasing competition on its home patch, but a major acquisition is not necessarily the key to its future success, analysts are warning. The question now is who might be the next target for DT's embrace, after the fracas that stopped it controlling Telecom Italia (in a battle surprisingly won by Olivetti), and the consequent souring of a Gallic embrace with France Telecom. BellSouth has been mentioned, as has Global Crossing: but could Cable & Wireless, or the weakened BT, be next? The fat lady has yet to sing. ®

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