Qwest Communications International Inc. could be getting hostile.
The Denver-based long-distance and data communications company has been trying to grab US West Inc. and Frontier Corp. away from planned mergers with Global Crossing Ltd., the international fiber-optic communications firm. So far, Qwest has offered the boards of US West and Frontier a package of stock and cash to persuade them to toss over Global Crossing -- including a sweetened offer last week that brought the price for both companies to $54.3 billion. The two firms have been cool to Qwest's overtures so far.
In the latest move, Qwest chief Joseph Nacchio sent a letter to his company's shareholders over the weekend that hinted a hostile takeover bid could be in the offing. "As circumstances change, we may consider adopting different strategies to encourage US West and Frontier, or their shareowners, to accept our offers, and we may set a deadline" for them to act, he wrote.
A Qwest spokesman confirmed that the comment was intended to suggest that the company was prepared to go directly to the shareholders of US West and Frontier.
"We're pretty much swimming in good old '80s merger mania," joked Pascal Aguirre, an analyst with Renaissance Worldwide.
A spokesman for US West, which is also headquartered in Denver, said the company could not comment on the Qwest statement. "Obviously, we're aware of all sorts of options that they have," said spokesman David Banks. "The board continues to consider the offer."
A hostile bid would add a new layer of risk to the complex merger fight, analyst Aguirre said. Such battles focus all attention on finances, to the exclusion of factors such as which combination of companies presents the best fit.
Frontier yesterday announced that its second-quarter earnings would fall short of expectations, coming in at 20 to 22 cents per share. Analysts had expected 28 cents per share. After the meeting, the company issued a statement that the disappointing earnings would not affect its plans with Global Crossing but added that it was still evaluating Qwest's bid.
A Qwest spokesman said last night that the company would not revise its bid for Frontier in light of the earnings news and urged "prompt affirmation" of its offer. For its part, Global crossing said last night that it still planned to go ahead with its merger plans.
Both Bermuda-based Global Crossing and Qwest said the local phone and high-speed data services offered by US West and Frontier's national long-distance network would create a telecommunications powerhouse. One group that has looked at the competing mergers, the Communications Workers of America, has begun to campaign against the Qwest deal.
The union, which represents 36,000 workers in the states served by US West, warned that Qwest's filings show it intends to cut $7 billion in combining the two companies. In a statement, CWA President Morton Bahr called the Qwest offer "a throwback to the days of corporate raiding" that would degrade telephone service. The union favors the Global Crossing deal, which it says is more squarely based on new investment in technology.