U S West to Divide Its Cable, Phone Operations

U S West Inc., the Colorado-based regional telephone company that also owns a cable television empire, said Monday that it plans to split itself into independent telephone and cable companies.

The split is an acknowledgment by U S West that the advantages of having telephone and cable television operations under one roof didn’t materialize. Rather than putting together telephone and television, U S West’s competitors have been moving toward the Internet and offering a combination of local and long-distance service.

“It’s been in the last six to nine months, at least, that I became convinced that these networks were not going to come together in the future and the best thing for us would be to separate them,” said Richard McCormick, chairman and chief executive of U S West.

The breakup is scheduled to occur “sometime after mid-1998” subject to approval by regulators and shareholders, the company said.

The phone company would be called U S West Inc. and would own telephone, data and wireless operations now serving 25 million customers in 14 Western and Midwestern states. It would also own a related Yellow Pages operation and electronic directory business known as U S West Dex.

Solomon Trujillo, 45, president and chief executive of U S West’s phone business, would become chief executive of the phone company after the split-up.

McCormick would be chairman of the new U S West.

The cable company--the nation’s third-largest--would be called MediaOne Group Inc. and own a cable TV distribution system with more than 5 million customers in 19 states.

MediaOne also would own U S West’s 25% interest in the Time Warner Entertainment partnership that owns cable systems, the Warner Bros. film studio and the HBO pay-television service.

It would also own U S West’s international interests and interactive services.

Charles M. Lillis, 56, president and chief executive of the current cable business of U S West, would be chief executive of MediaOne Group.

The company has been giving investors a choice between the two businesses since November 1995, when it set up its media group as a separate class of stock. The value of U S West Communications shares are based on the performance of the company’s local phone operation, while U S West Media shares are linked to its cable and wireless units.

U S West Communications shares fell $1.31 to close at $38.56 on the New York Stock Exchange, while U S West Media shares fell $2.31 to close at $24.25.

The two companies are expected to maintain their headquarters in the Denver area. U S West is based in the suburb of Englewood.

U S West originally thought there would be huge growth opportunities in having telephone and cable TV operations under one roof.

But McCormick said, “Recent developments in technology, markets and regulation will provide strategic competitive opportunities for both businesses that outweigh the benefits of remaining together.”

Splitting the business will “make it easier for each of them to pursue exciting new opportunities for serving customers in the communications, data and entertainment sectors,” he said.

The split will affect about 700 people mostly in the Denver area who are working in legal, administrative and other positions for the current U S West.

“We will divide this talent to meet the companies’ needs. Generally, employees will follow their work,” McCormick said.