Cable Tech

Qwest Scrapes Up Allegiance

Qwest Communications International Inc. (NYSE: Q) announced Thursday afternoon that it intends to buy Allegiance Telecom Inc. for approximately $300 million in cash (see Qwest to Buy Allegiance).

Under the terms of the agreement, which has been rumored for several months, Qwest will issue approximately $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5 percent, in addition to the cash price (see Qwest May Want Allegiance).

Dallas-based Allegiance provides service to about 100,000 small and medium-sized business in 36 cities. The company filed for Chapter 11 protection in May this year and was delisted from Nasdaq. It employs roughly 3,600 people (see Allegiance Files for Chapter 11 and Allegiance Declares Chapter 11).

For Qwest, the attraction of the deal is pretty straightforward. Allegiance has customers in 31 markets outside of Qwest’s territory, and the RBOC badly needs to boost its traditional voice revenues -- in decline despite a third-quarter profit (see Qwest Reports Q3 Profits).

"Upon closing of this transaction, Qwest will have more POPs than any other inter-exchange carrier in the U.S.," said Richard Notebaert, Qwest chairman and CEO, in a prepared statement.

For Allegiance, the deal should bring some relief. At least two other parties are said to have been sniffing around the company for some time, without making a move.

The agreement with Qwest is subject to approval by the U.S. Bankruptcy Court and certain other government regulatory agencies. Allegiance has filed a motion with the Bankruptcy Court to begin a sale process in which Qwest will be designated as the stalking horse bidder and other interested potential bidders will have an opportunity to offer higher bids.

If Qwest is successful in the bidding process, the company expects to close on the transaction in 2004.

In afternoon trading on the New York Stock Exchange, Qwest shares were up 18 cents at $3.72.

— Jo Maitland, Senior Editor, Boardwatch

BobbyMax 12/4/2012 | 11:09:46 PM
re: Qwest Scrapes Up Allegiance Qwest has bankrupted its shareholders. It will never become proftable again. Its stocks will not go up over $5 per share. The present management contiues the enjoy the the salaries and bonuses. The copompany can ;ast forever with its current share value. There is no incentive toget out of the hole it has created.

The company is overstaffed ano there is no change its management style.Its stock has dropped from $62 per share to $3.50 or so. There is no progress into the corruption charges against Qwest.
ATMRules 12/4/2012 | 11:09:46 PM
re: Qwest Scrapes Up Allegiance Easy pickings.......
fw23 12/4/2012 | 11:09:45 PM
re: Qwest Scrapes Up Allegiance I'm sorry guy, but I dont agree. Qwest minus
USWest resembles Enron. Or Enron would resemble
Qwest if Enron had used its inflated stock price
to buy Exxon/Mobil and then used Exxon's assets
to bail them out of their problems. If Enron
could have sold some else's yellow pages business
for a few billion, they would have been ok too.

The USWest assets at Qwest are mostly as
STRONG-AS-EVER. Qwest has solid responsible
leadership now as well. The problem with
Qwest is that they have an obsolete network
and need to get on the LIGHT-based networking
bandwagon before its too late.

Iipoed 12/4/2012 | 11:09:44 PM
re: Qwest Scrapes Up Allegiance One of the main problems with Qwest is their infrastructure. They have always made it company policy to buy technology based on price. performance, reliability and proven software have always come second.
They constantly have been in the postion of upgrading/replacing recent capital expenditures due to poor performance and reliability issues.
This affects their customer loyalty as well as margins.
capolite 12/4/2012 | 11:09:43 PM
re: Qwest Scrapes Up Allegiance Qwest has wasted billions of capex with their low price or political pull purchasing philosophy. It's hard to screw up a regulated monopoly with a guaranteed rate of return in one of the fastest growing markets in the US but through avarice, hubris and incompetence they have managed to do it. The only thing that will save Qwest are the US West assets.
whyiswhy 12/4/2012 | 11:09:42 PM
re: Qwest Scrapes Up Allegiance Qwest announces winners of latest Capex:



billy_fold 12/4/2012 | 11:09:37 PM
re: Qwest Scrapes Up Allegiance I think that there is more that will play out on the Qwest story. I don't think that the SEC has shown all its cards yet. We will have to wait and see what develops. (If it does, I told you so.)

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