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CWA Warns of Public Risk in Qwest Takeover Bid
Qwest Communications is upping its bid for U S West and Frontier Communications, but CWA is working to make certain that communities, consumers and shareholders recognize that the takeover would undermine phone service, slash jobs and hurt shareholder investment.
The U S West board of directors rejected an earlier bid by Qwest because the company's plans indicate it will not invest sufficient capital in growth initiatives currently underway at U S West.
In a letter to the governors of the 14 states served by U S West, CWA President Morton Bahr warned that the proposed takeover of their phone company by Qwest would drain jobs and investment from the region and further imperil already declining service quality. CWA represents 36,000 workers across U S West territory and has been fighting for upgrades in the network and equipment to improve service to customers.
Bahr pointed out that the Qwest bid proposes to squeeze more than $7 billion from the deal through "cuts in network operations and maintenance, sales and marketing, billing, customer service, back office support and in procurement efficiencies" according to Qwest's filing with the Securities and Exchange Commission. Another $4 billion in projected "synergies" would come from reduced investment in network and other infrastructure.
By contrast, Bahr noted, Global Crossing's proposed merger with U S West, supported by CWA, calls for minimal operating expense cuts from the combination, with plans to grow revenues by $36 billion through new investment in technology and global business expansion.
"U S West already has difficulties meeting its responsibility to provide quality local telephone service, and Qwest's plan to cut operations will only exacerbate those problems," Bahr wrote. He cited understaffing for problems that have caused public service commissions in Colorado, Oregon, Washington, Arizona, Idaho, Montana and Minnesota to call U S West to task for poor service performance. The company has cut employment by 10 percent since 1992, and in the past three years alone, Bahr noted, U S West has been fined $12 million for missed performance standards, and millions more has been refunded to customers for service quality problems.
Bahr called Qwest's strategy "a throwback to the days of corporate raiding" and said any company seeking to merge with U S West should have a strategy based on investment and growth, be accountable for providing top quality service and must demonstrate that the needs of consumers carry as much weight in business deliberations as those of shareholders.
Separately, CWA is alerting Qwest shareholders that their investment is in jeopardy if the company continues its pursuit of U S West. An analysis of both companies' projected earnings and Qwest's proposed business plan indicates that a merger with U S West will hurt Qwest financially, saddling it with nearly $10 billion in U S West debt and hurting its ability to raise capital at low rates.
Qwest's filings indicate that the company will not pursue growth initiatives now underway at U S West, but will instead rely on cost cutting in U S West operations, the CWA analysis found. "In contrast, Global Crossing is forecasting increased revenues of $36 billion" through new investment in technology and global business expansion, the report said.
The U S West board of directors rejected an earlier bid by Qwest because the company's plans indicate it will not invest sufficient capital in growth initiatives currently underway at U S West.
In a letter to the governors of the 14 states served by U S West, CWA President Morton Bahr warned that the proposed takeover of their phone company by Qwest would drain jobs and investment from the region and further imperil already declining service quality. CWA represents 36,000 workers across U S West territory and has been fighting for upgrades in the network and equipment to improve service to customers.
Bahr pointed out that the Qwest bid proposes to squeeze more than $7 billion from the deal through "cuts in network operations and maintenance, sales and marketing, billing, customer service, back office support and in procurement efficiencies" according to Qwest's filing with the Securities and Exchange Commission. Another $4 billion in projected "synergies" would come from reduced investment in network and other infrastructure.
By contrast, Bahr noted, Global Crossing's proposed merger with U S West, supported by CWA, calls for minimal operating expense cuts from the combination, with plans to grow revenues by $36 billion through new investment in technology and global business expansion.
"U S West already has difficulties meeting its responsibility to provide quality local telephone service, and Qwest's plan to cut operations will only exacerbate those problems," Bahr wrote. He cited understaffing for problems that have caused public service commissions in Colorado, Oregon, Washington, Arizona, Idaho, Montana and Minnesota to call U S West to task for poor service performance. The company has cut employment by 10 percent since 1992, and in the past three years alone, Bahr noted, U S West has been fined $12 million for missed performance standards, and millions more has been refunded to customers for service quality problems.
Bahr called Qwest's strategy "a throwback to the days of corporate raiding" and said any company seeking to merge with U S West should have a strategy based on investment and growth, be accountable for providing top quality service and must demonstrate that the needs of consumers carry as much weight in business deliberations as those of shareholders.
Separately, CWA is alerting Qwest shareholders that their investment is in jeopardy if the company continues its pursuit of U S West. An analysis of both companies' projected earnings and Qwest's proposed business plan indicates that a merger with U S West will hurt Qwest financially, saddling it with nearly $10 billion in U S West debt and hurting its ability to raise capital at low rates.
Qwest's filings indicate that the company will not pursue growth initiatives now underway at U S West, but will instead rely on cost cutting in U S West operations, the CWA analysis found. "In contrast, Global Crossing is forecasting increased revenues of $36 billion" through new investment in technology and global business expansion, the report said.