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Investors say Qwest is the front-runner so far
Investors say Qwest is the front-runner so far

DENVER -- Qwest Communications International Inc., the No. 4 U.S. long-distance phone company, will likely beat Global Crossing Ltd. in acquiring US WEST Inc. because it seems a more stable company, US WEST investors said.

Qwest made an unsolicited $50.9 billion offer for US WEST, the 6th-largest U.S. local phone company, and No. 5 long-distance provider Frontier Corp. Sunday, seeking to thwart earlier agreements the pair have with Global Crossing. Though Qwest originally offered a premium to its rival's bid, its shares have fallen 26 percent since then, leaving the offers roughly equal.Several big US WEST investors said they still prefer Qwest because it's bigger, has been in business longer and can offer more stability than Global Crossing. Two-year-old Global Crossing, which is building a worldwide undersea fiber-optic network, hasn't been around long enough to convince conservative US WEST shareholders of its prospects, they said.

"I think Qwest is going to win," said Paul Wright, an analyst at Loomis Sayles & Co., which owns about 697,000 US WEST shares. "The US WEST board has to feel a lot more comfortable with Qwest's currency."

Both Qwest and Global Crossing are basing their offers on high-flying stocks.

Global Crossing shares have risen fivefold since its initial stock sale in August. Qwest is up almost sevenfold since its IPO in June 1997.

Qwest offered as much as 1.783 Qwest shares for each share of US WEST, or $63.74. Global Crossing is paying about 1.2 of its shares for each US WEST share, depending on how many shares it has to issue in the Frontier purchase. At the close of trading Wednesday, Global Crossing's offer was worth $62.88.

Both companies would assume about $5.2 billion in US WEST long-term debt.

One point of concern about Global Crossing's offer is its plan to create two separate stocks to track the performance of the combined company's local and international divisions. That's left some shareholders wondering exactly what they'll get if Global Crossing wins.

"The Global Crossing deal is really confusing," said Craig Nedbalski, an analyst at Society Asset Management Inc., which owns about 255,000 US WEST shares.

US WEST declined to comment on the decision. So far, the company has only acknowledged that it has received Qwest's offer and will consider it.

Breaking up Global Crossing's agreement with US WEST won't be easy. US WEST Chief Executive Solomon Trujillo was the one who first proposed the merger to Global Crossing, and he would become co-CEO at the combined company unlike at Qwest, where he would be vice chairman.

What's more, US WEST is tendering for about 9.5 percent of Global Crossing shares and would have to pay an $850 million breakup fee if it backs out of the merger.