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Qwest's Long-Distance Arm Draws Bids Below Targets
By Amol Sharma
The Wall Street Journal
Friday, June 5, 2009

Preliminary bids for Qwest Communications International Inc.'s long-distance business are coming in well below the $2 billion to $3 billion it sought, leaving the telecommunications company with the choice of calling off the auction or accepting a significant discount.

Some parties have valued Qwest's long-haul network -- which carries long-distance phone and data traffic and provides advanced services for corporate and government customers -- at under $1 billion, according to people familiar with the matter.

Among the most likely buyers for the network is Level 3 Communications Inc., which is formulating a potential bid, the people said.  XO Holdings Inc.'s XO Communications, which is controlled by billionaire investor Carl Icahn, and TW Telecom Inc. have also expressed interest, the people said.

A spokesman for Qwest declined to comment.

Edward A. Mueller

Qwest, the No. 3 U.S. phone company by subscribers, is shedding landline phone customers and doesn't have its own wireless network.  It is delivering profits mainly through aggressive cost cutting.

Chief Executive Edward A. Mueller could use proceeds from the sale of the long-distance business to help pay down Qwest's $13.3 billion in debt.  He will now have to decide whether to cancel the auction or settle for a sale at a significant discount from the valuation he had originally hoped to get.

Finding a value for Qwest's assets has been difficult for potential buyers, since the company doesn't break out its revenue by long-distance network versus local-access network.

Level 3 Communications, considered by many in the industry as the most logical buyer, could beef up its own nationwide Internet backbone with Qwest's network and take on its government and large business customers.

Large telecom companies such as AT&T Inc., Sprint Nextel Corp. and Verizon Communications Inc. decided not to bid for Qwest's assets, the people familiar with the situation said.

Qwest's long-distance business has struggled as an excess of capacity of long-haul networks has led to a collapse in pricing.  Meanwhile, in its 14-state local access territory, Qwest is facing increasing competition from cable providers.

Qwest's shares closed down 4.8% at $4.19 on the New York Stock Exchange Thursday.

Bids for Qwest's network were due Monday, but the company extended the process, the people said.

—Keith Winstein contributed to this article.

Write to Amol Sharma at