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FCC Approves Qwest-U S West Merger
By Ted Bridis   Associated Press
WASHINGTON — Federal regulators today conditionally approved the $50 billion merger of Qwest Communications Inc. and regional Bell company U S West Inc. Qwest will have to divest itself of its customers in the U S West territory of 14 Western states.

The Federal Communications Commission gave conditional approval on a 5-0 vote.

The announcement comes after Deutsche Telekom AG abruptly ended talks to acquire the two Denver-based telecommunications companies.

The FCC said Qwest must give up about 6 percent of its long-distance customers, all of whom live in areas served by U S West. Commissioners said they want full details of Qwest's plans to turn over those customers to another company before they finally approve the merger.

"Qwest's divestiture and the commission's approval must be completed prior to closing the merger," the FCC said in a statement.

Qwest on Thursday blamed U S West for pushing away Deutsche Telekom. Although Qwest did not name Deutsche Telekom as the suitor, people familiar with the negotiations confirmed the German telephone company met with executives of both U S West and Qwest to discuss a three-way deal.

"We regret that U S West apparently wouldn't even consider an alternative transaction involving" Deutsche Telekom, Joseph P. Nacchio, chairman and chief executive officer of Qwest, said in a statement.

Additionally, some states are reviewing the merger for approval.

U S West, a Baby Bell, had said it would enter into an agreement with Deutsche Telekom only if it did not jeopardize or delay its merger with Qwest, and only if the new offer was equal to or better than the offer from Qwest.

FCC Chairman William Kennard, indicated earlier today that federal approval of the Qwest-U S West merger was imminent, provided the companies sell certain long-distance operations.

Deutsche Telekom refused to comment on what it called market rumors.

"We have several irons in the fire, but we never name names. But we are still continuing our path seeking internationalization partners. We are not under time pressure to do anything," spokesman Hans Ehnert said.

A call to a spokesman at U S West was not immediately returned.

Qwest started negotiating with Deutsche Telekom weeks ago — behind the back of U S West. Last week, U S West executives threatened to sue Qwest if the company tried to back out of their deal.

The friction between Qwest and U S West appeared to ease over the weekend after Qwest said it would agree to an offer only if it included U S West.

But the hard line on negotiations with Deutsche Telekom increased the tension between U S West and Qwest.

Nacchio said today that U S West's stand was "nothing short of amazing," adding that the events of the past few weeks were among "the most bizarre things that I have been through."

Qwest's shares slid 11 percent, or $8.93}, to $51.06 today on the New York Stock Exchange, where shares of U S West were down 10 percent, or $7.25, at $68.50. Deutsche Telekom's U.S. shares were up 62{ cents at $93.68.

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