Qwest Expected to Buy US West; Global to Acquire Frontier

Qwest Communications International Inc. is close to an agreement to buy local phone company US West Inc. for $40.5 billion, a person familiar with the negotiations said.

Global Crossing Ltd., a rival bidder for Denver-based US West, is expected to buy long-distance carrier Frontier Corp. for $12.9 billion, the source said. The transactions would end a monthlong bidding contest between Qwest and Global Crossing for the two companies.

The US West board was expected to meet Friday night, and the agreement could be announced as early as this weekend, the person said.

Under the plan, Denver-based Qwest, the No. 4 U.S. long-distance company, would gain 25 million US West customers in 14 Western states. Global Crossing, which is building a worldwide undersea fiber optic network, would get 2 million Frontier customers, a long-distance U.S. network and an Internet-hosting business.

Philip Anschutz, Qwest founder and owner of a 40% stake in Qwest, and Gary Winnick, Global Crossing founder and chairman, negotiated the agreement, the person said.

In return for walking away from a purchase agreement with US West, Global Crossing, based in Bermuda, would receive $420 million in cash, capacity on long-distance networks and stock, the source said.

The amount is about half of the breakup fee written into the original purchase agreement between Global Crossing and US West. Global also would gain because Qwest would drop its higher bid for Rochester, N.Y.-based Frontier, allowing the transaction to proceed without another round of bids, the person said.

All of the companies declined to comment.

Qwest shares, which fell 22% since the company bid for Frontier and US West on June 14, rose $1.06 to close at $35 on Nasdaq. Global Crossing, which fell 9.1% since the Qwest bid, rose $2.13 to $46.13, also on Nasdaq. On the New York Stock Exchange, Frontier shares rose 19 cents to $59.13, and US West rose $2.44 to $60.25.