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Qwest is making its bid to join giants of telecommunications

NEW YORK -- A bit less than two years ago, just before Qwest Communications International Inc. first offered stock to the public, Joseph P. Nacchio, who had just left a top job at AT&T Corp., was asked what he meant to create in Qwest.

"I want to create a full-service communications provider," said Nacchio, Qwest's chief executive.The answer did not ring true. After all, it seemed so much easier for Qwest to build an advanced nationwide communications network and then sell it.

But on Sunday Nacchio proved his strategy was real by firing off a pair of hostile bids, worth as much as $55 billion in cash and stock, to acquire both US WEST Inc., the smallest of the Baby Bells, and the Frontier Corp., one of the nation's biggest long-distance carriers.

Both of those companies had already agreed to be acquired by Global Crossing Ltd. of Bermuda, another strapping young communications provider.

Even as early as March 1998, Qwest's agreement to acquire LCI International Inc. for $4.4 billion signaled that the company was serious about serving callers in addition to serving other carriers. And maybe because Philip Anschutz, the oil and railroad tycoon behind Qwest, had already made his billions, he felt no pressure to sell while the getting was good. Instead, he rolled the dice on creating a giant.

In some ways, the rise of Qwest represents an ideal confluence of ability, personality and opportunity. Anschutz and Nacchio supplied the first two. The Internet and Congress supplied the third, with the Telecommunications Act of 1996 introducing competition that has nurtured demand for communications generally and for Internet service specifically.

Serendipity also played a role. One of the more interesting aspects of the communications revolution is the way it has built on older, more traditional industries. For example, the real estate easements and rights of way won by railroads and pipeline companies 100 years ago -- networks that crisscross the United States and reach into downtowns everywhere -- have taken on a second life as pathways for high-capacity fiber optic communications networks.

The first two letters in Sprint's name initially stood for Southern Pacific, the railroad that started the long-distance giant. Through a series of corporate mutations involving GTE and the old United Telephone, Sprint became independent.

Likewise, MFS (originally Metropolitan Fiber Systems) Communications, one of the first companies to broadly challenge the Bells' local phone monopoly with business customers, emerged from Peter Kiewit & Sons, a construction empire based in Omaha.

And the Williams Cos., which supplied Worldcom with its first fiber optic network, the Wiltel communications unit, recently started yet another national fiber optic network.

Through Anschutz, Qwest has become the Southern Pacific Railroad's second great communications progeny. For all of the brilliance of Global Crossing's founder, Gary Winnick, a Los Angeles financier, Global Crossing does not enjoy Qwest's sort of heritage. It is not that an old industrial pedigree has made its holders any more prescient, but it has given them a head start.

So, while Global Crossing is by no means out of the game for US WEST and Frontier, given the sharp thumbs-down the market gave Qwest Monday, a winning deal by Qwest would catapult it into the ranks of the world's biggest communications companies. That would be an impressive feat for Nacchio, a personable, engaging, fast-talking salesman who is widely admired for his smarts.

In Qwest's machismo culture, executives have a good time and clearly enjoy devising ways to crush competitors. It is a fairly productive approach. Nacchio has assembled a crack executive team including Lewis O. Wilks, Qwest's aggressive Internet chief, who came from GTE, and Robert S. Woodruff, the chief financial officer from Coopers & Lybrand.

In a way, though, Qwest's quest is something of a personal rivalry between two former AT&T executives -- Nacchio and Robert Annunziata, Global Crossing's chief executive, who have known each other for years.

Before he left to head Teleport Communications Group, one of the early competitors to the Bells in local markets, in 1984, Annunziata had spent most of his career at AT&T.

Nacchio stuck it out at AT&T until October 1996, when it became clear that the chairman, Robert E. Allen, would not anoint him as a successor. In leaving to lead Qwest, he joined an exodus of senior AT&T executives that included Alex J. Mandl, who became chairman of Teligent Inc., the wireless communications company.

C. Michael Armstrong took over as AT&T's chief executive after Allen's hand-picked successor, John Walter, failed to impress the board, and the first big deal Armstrong made was to acquire Annunziata's Teleport in January 1998 to get its fiber optic links to big business customers.

As part of the deal, Annunziata rejoined AT&T, but it did not last long. Winnick hired him to lead Global Crossing at least partly for reasons Nacchio was chosen to head Qwest: name recognition in -- and a thorough working knowledge of -- the communications business.

In recent years, Nacchio and Annunziata have come to be rivals in almost every sense, competing for the same investors, and many of the same customers. Now they are competing for a place at the table with the moguls of communications.