WASHINGTON -- Federal regulators signed off conditionally Friday on the $46 billion merger of Qwest Communications and U S West. But signs of strain between the two telecommunications companies raised questions about how they will make the marriage work.
The Federal Communications Commission's approval of the deal with conditions came just after the collapse of Qwest Chairman Joe Nacchio's hopes to strike a deal with Deutsche Telekom AG to take over both Qwest and U S West.
When the German telephone company walked away Thursday, Qwest blamed U S West for scuttling the talks. U S West, which last week threatened to sue Qwest, said it was protecting its shareholders.
''I certainly had a negative view of the Qwest-U S West merger to begin with,'' said Drake Johnstone, an analyst with Davenport & Co. investment firm of Richmond, Va. ''Now when you throw on top of that the clear animosity between the management teams, why would anyone want to own the combined company?''
The FCC approval requires Qwest -- a long-distance telephone and Internet carrier -- to shed the 6 percent of its long-distance customers in U S West's 14 Western states. By law, U S West -- a Baby Bell -- cannot offer long-distance service to its local customers without first showing that its local markets in those states are open to competition. Since that applies to data traffic as well, the companies must also address data traveling on Qwest's massive Internet pipes that originate in U S West states.
The companies must now produce a divestiture plan for the FCC. Qwest executives say they are already in active negotiations with a buyer for those customers.
FCC Chairman Bill Kennard said the deal would give U S West major incentives to open its markets to competition so it can offer long-distance service.
Not lost on the regulator was the irony of the FCC approval timing, just as tensions spiked between the merger partners.
Brainerd Dispatch ©2013. All Rights Reserved.