December 22, 2003 — (WEB HOST INDUSTRY REVIEW) — Qwest Communications (qwest.com) announced last week that it has signed an agreement to purchase certain assets from Allegiance Telecom (algx.com), a provider of facilities?based telecommunications based in Dallas, Texas.
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Under the terms of the agreement, Qwest will purchase the Allegiance assets for approximately $300 million in cash. Qwest will also issue approximately $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5 percent.
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Qwest said it intends to purchase network assets in 36 metro markets, 31 of which are outside of Qwest’s local service region. The carrier said this would increase its number of points of presence (POP) by almost 700 and provide it with additional network facilities.
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“Upon closing of this transaction, Qwest will have more POPs than any other inter-exchange carrier in the US, allowing us to better serve existing customers and immediately expand our ability to serve more businesses than ever before,” said Richard C. Notebaert, chairman and CEO of Qwest. “With these assets, we expect to improve Qwest’s profitability and expand our delivery of end-to-end communications solutions to businesses nationwide.”
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Qwest said it expects to drive revenue and achieve significant cost benefits from using Allegiance’s local network POPs to connect Qwest’s network to business customers. The company also said expanded access would help support delivery of new enterprise communications services, such as Voice over IP.
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“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 chief executive officer of Allegiance Telecom.
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Reports first circulated in November saying the two companies had entered discussions about a potential acquisition valued at $350 million. Allegiance Telecom, which is saddled with over $1 billion in debt, filed for chapter 11 bankruptcy protection in May and must have creditors and the courts approve any transaction.
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