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U S West threatens lawsuit
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March 3, 2000: 3:42 p.m. ET
Baby Bell's counsel says Qwest must stick to deal or face consequences
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NEW YORK (CNNfn) - Telecommunications company U S West on Friday threatened to sue Qwest Communications if the company backs out of their proposed $36 billion merger and demanded Qwest come clean about any discussions it reportedly is having with Deutsche Telekom.
Officials of the Denver-based Baby Bell, which provides broadband and communications services to more than 25 million customers nationwide, were angered at not being informed that Qwest, a Denver-based equipment maker, also was discussing a possible deal with the German telecom company.
Mark Roellig, general counsel of U S West, fired off a letter Friday to Qwest general counsel Drake Tempest saying "we are extremely concerned that these discussions are ongoing with no information being provided to us," and claiming Qwest was "in clear violation of our merger agreement."
Also in the letter, U S West said if Qwest backs out, it would sue for more than the $800 million break-up fee in the merger contract.
Philip Anschutz, co-founder, chairman and 39-percent owner of Qwest, reportedly held talks with Deutsche Telekom's Chief Executive Officer Ron Sommer late last month, at which Anschutz was said to have supported an offer for a deal with Telekom. The German company reportedly offered to purchase Qwest for at least $70 a share.
Officials of both companies declined to comment on reports of the possible breakup.
"Such damage would very likely make the Pennzoil judgment pale in comparison," Roellig wrote, referring to a $10.3 billion jury award against Texaco Inc. for using unethical tactics in trying to break up the merger between Pennzoil and Getty Oil Co.
Roellig also wrote that published reports Friday which quoted Qwest CEO Joseph Naccio as saying that "as Yogi Berra said, 'It's not over until it's over,'" and that the two companies could break off the merger "if necessary," and that "every merger can be intervened on; it only costs money," were a cause of serious concern.
Also based in Denver, Qwest produces fiber optic communications systems for other telecommunications companies.
Deutsche Telekom is Europe's largest telecommunications company, providing telephone and cable service throughout the continent.
Roellig also said in the letter that U S West is "being besieged by calls" from shareholders concerned about Deutsche Telekom discussions with Qwest, and that U S West is "very concerned," since such discussions would be in violation of their merger contract.
U S West (USW: Research, Estimates) closed up 3-3/8 to 75-3/8 Friday. Qwest (Q: Research, Estimates) shares also closed up 4-5/16, to 64-5/16.
American depository receipts (ADRs) of Deutsche Telekom (DT: Research, Estimates) closed up 1-9/16 to 98-5/8.
In prepared statements Friday, U S West reiterated its "full commitment to pursuing and closing its pending merger with Quest Communications International as required by the existing merger agreement, which has already been approved by shareholders of both companies."
In other developments, Qwest is reportedly in talks to buy a minority stake in equipment maker Next Level Communications (NXTV: Research, Estimates).
Rohnert, Calif.-based Next Level, in which Motorola Inc. holds a majority stake, makes equipment which allows telephone companies to transmit voice, high-speed data and video services over copper telephone wires. 
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