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Qwest to Buy Allegiance Telecom Assets

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DENVER, Dec. 19 -- Denver-based Qwest Communications International Inc. agreed yesterday to buy assets of the bankrupt Allegiance Telecom for $300 million in cash.

Qwest intends to purchase network assets in 36 metro markets, 31 of which are outside the Qwest local service region. This will increase Qwest's points of presence by nearly 700 and provide additional network facilities to support the delivery of end-to-end voice and data communications to business customers across the US.

Under the terms of the agreement, Qwest will purchase the Allegiance assets for approximately $300 million in cash. In addition, Qwest will issue approximately $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5 percent. Allegiance currently carries approximately $550 million in telecommunications traffic across these assets. Qwest plans to combine and optimize this traffic, with its existing network traffic, in 2004.

Allegiance Telecom filed for bankruptcy in May. The company has 100,000 small and medium-size business clients. It has 3600 employees, including 1200 in the Dallas area, where Allegiance is based.

The agreement is subject to approval by the US Bankruptcy Court and certain other government regulatory agencies. Allegiance has filed a motion with the Bankruptcy Court to begin a sale process in which Qwest will be designated as the stalking horse bidder, and other interested potential bidders will have an opportunity to offer higher bids for the assets of Allegiance. If Qwest is successful in the bidding process, the company expects to close on the transaction in 2004.

"A Qwest-Allegiance pairing would dramatically increase competition in the telecom industry and would result in the first large scale out-of-region competitor for local telephone service between the regional Bell companies -- a huge benefit to medium and small businesses," said Royce Holland, chairman and CEO of Allegiance Telecom.

Qwest and Allegiance emphasized that they are committed to ensuring that Allegiance customers continue to receive quality service as the Allegiance bankruptcy process is resolved and its customers are transitioned to Qwest.

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Dec 2003
CommunicationsNews & Features

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