DENVER — Qwest Communications International Inc. may escape having to fork over to states any of the $7.05 billion gained from the pending sale of its yellow-pages unit, QwestDex.
None of the 14 states in Qwest's local-service region contacted by Dow Jones Newswires said they would definitely demand a share of the money.
Some said they don't have jurisdiction over the sale and don't intend to claim any proceeds. Others said they will be satisfied with continuation of a credit tied to QwestDex that lowers phone bills. And a few said they hadn't yet eliminated any options, including getting part of the proceeds.
The states with some annual QwestDex credit imbedded in their rates include Utah, Washington, Arizona, Oregon, Colorado, Minnesota, Iowa, New Mexico and Nebraska. In total, the nine states receive $332.3 million a year in credits.
The buyer of QwestDex — which includes yellow pages, white pages and QwestDex.com in 14 states — is a new company formed by the private equity firms of the Carlyle Group as well as Welsh, Carson, Anderson & Stowe. Qwest plans to use the QwestDex proceeds to reduce its $26.3 billion in debt.
The states differ in their stance on the QwestDex sale because of different regulations, state statutes and court interpretations from state to state.
More than half of the 14 states have a QwestDex credit, or "imputation," reflected in Qwest's rates for basic phone service, and such credits total more than $300 million a year. For example, such credits reduce per-line basic phone rates by $3 a month in Washington, by $1.80 a month in Colorado and by $1.50 a month in Iowa.
Directory revenue reflected on Utah customers' bills amounts to about $2.40 per month for a local residential line and $2.50 per month for a local business line.
The QwestDex credit dates back to the 1980s, when the former US WEST, now part of Qwest, transferred its directory business from the regulated phone company into an unregulated subsidiary. Regulators argued that if the phone company lost the profitable directory business, the states should be able to credit revenue from the directory business to the regulated phone business.
For some states, ensuring that these credits don't disappear after the QwestDex sale is more important than securing proceeds from the sale. Since such credits mean no out-of-pocket cash payment for cash-strapped Qwest, a continuation of the credits appears more likely than states getting cash from QwestDex proceeds.
Of the 14 states, seven won't even claim jurisdiction over approval on the sale, according to their regulatory bodies. Of those seven, Wyoming, Idaho, South Dakota, and North Dakota have no QwestDex credit in their rates. The other three — Colorado, Minnesota and Oregon — do have a QwestDex credit imbedded in their rates.
Of the other seven states, Washington, Utah, and Arizona believe they do have jurisdiction over the sale. Iowa said it may have jurisdiction. Montana, New Mexico and Nebraska are uncertain or unlikely to assert jurisdiction.
Since Qwest gets the benefits of the QwestDex sale, states can argue it should continue to bear the burden of the QwestDex credits toward phone rates.
Under the sale agreement, the QwestDex buyers have no obligation to reimburse Qwest for the QwestDex credit, said Qwest spokesman Steve Hammack. Hammack declined to detail the company's strategy to gain state approvals.