Qwest Communications, in a bid to come out of a slump, and fill up its nearly empty fiber optic pipes says it is buying the assets of bankrupt telecom provider Allegiance Telecom for $300 million in cash and $90 million in debt. Most of these assets which are local or metro conduits are going to be used to deliver IP based services such as Internet Phone service.
bq. Allegiance’s network assets carry roughly $550 million in telecom traffic, according to Qwest, which plans to combine the Allegiance network with its own nationwide network. “This is a great chance for us to reduce costs,” said Qwest chairman and chief executive officer Richard C. Notebaert in an interview. “We think there will be a very fast payback.” To finance the acquisition, Qwest said it will issue roughly $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5%.
According to the Associated Press, “Allegiance network assets in 36 markets, 31 of which are outside the 14-state region where Qwest is the dominant local phone service provider.”
bq. “Upon closing of this transaction, Qwest will have more POPs than any other interexchange carrier in the U.S., allowing us to better serve existing customers and immediately expand our ability to serve more businesses than ever before,” said Richard Notebaert, Qwest chairman and CEO. (AP via Denver Post)
This is yet another example of escalaving hostilities”between the Baby Bells, for long the best of friends, long distance providers and other independents as they vie for the business dollars. What else can they do? Consumer phone business is quickly turning into a money losing proposition,