Jul 10, 2000 12:00 PM,

Convergence in action: Qwest, U S West adjust to life together

Toby Weber

As participants in the first megamerger between old and new economy communications companies, Qwest Communications and U S West are heading into unexplored realms of challenges and benefits.

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While Qwest Chairman and CEO Joseph Nacchio says that Internet and IP is still "the future of this company," the acquisition compels Qwest to integrate U S West's local exchange carrier and wireless businesses.

This integration presents the possibility of new bundled offerings with local and wireless services, Nacchio said. It also forces Qwest to deal with higher levels of regulation.

U S West has had difficulties meeting requests for service, with customers waiting weeks or months to get phone service. To gain merger approval in several U S West states, the companies promised to meet certain levels of service.

"Our No. 1 priority is service stabilization," Nacchio said.

According to some analysts, Qwest would pay special attention to the local loop, even without state mandates.

"Local voice is the bread and butter for the new company. That's where they'll get the cash to fund data services," said Eric Rasmussen, senior consultant with TeleChoice.

Forced by regulators to divest its long-distance assets in the 14-state U S West territory, Qwest also hopes to re-enter the interexchange market in one or two states within a year.

With these hurdles to clear, the company seems to be taking a conciliatory approach with regulators. Last week, Qwest dropped 17 lawsuits U S West had filed against state utilities commissions.

Even with the flurry of activity and adjustment that surrounds the merger, Qwest's name keeps arising as a possible target for a buyout by Deutsche Telekom (see story on page 8). While Nacchio didn't speculate on of the rumors, he emphasized his company'slong-term viability.

"We've said from the beginning that the new Qwest will end up as one of the surviving multinationals. Whether we keep acquiring or we get acquired is insignificant," Nacchio said.