qwest makes surprise offer

Even as Qwest Communications tried last week to appease its bigger investors in the wake of a 25% drop in its stock value, some in the market said last week that it is actually the better strategic fit for the proposed U.S. West acquisition.

The stock drop came on the heels of Qwest's surprise announcement that it extended an offer to buy U.S. West and Frontier Corp., after both of those firms had already agreed to be acquired by Global Crossing.

The school of thought that Qwest is a better fit for the two takeover targets than Global Crossing says that since the majority of consumer phone calls are either local or domestic long distance, then Qwest and U.S. West combined can deliver those services better. Qwest is the fourth-largest long distance firm in the U.S. and U.S. West, of course, is one of the original Baby Bells.

Conversely, Global Crossing is set up as more of an international player with fiber optic lines at the bottom of the oceans, and not as good of a strategic fit in this acquisition, some analysts said.

Other market players, however, said that since Global Crossing already had merger agreements, then any other offer would have a tougher time, and as such, Global has room to breathe. And indeed, Global reportedly has no plans to up its standing offer, especially in light of the slide in Qwest's stock.

If Qwest does indeed win this dispute, then some said the market should expect to see some other company buy Global Crossing. Those sources took this attempt at an acquisition as a sign that Global needs a partner to survive in the consolidating telecom industry. Companies like SBC or Bell Atlantic, both of which are the results of three of the original Baby Bells merging, would most likely be the best fits in that scenario, analysts said.

Analysts said the companies should settle the matter within a few weeks, but then it goes before the regulators like the Department of Justice.