Qwest Communications International Inc. today announced it has signed an agreement to purchase certain assets and associated revenue streams from Alle...

Qwest Communications International Inc. today announced it has signed an agreement to purchase certain assets and associated revenue streams from Allegiance Company, Inc. Qwest intends to purchase network assets in 36 metro markets, 31 of which are outside the Qwest local service region. This will increase Qwest’s points of presence (POPs) by nearly 700 and provide additional network facilities to support the delivery of end-to-end voice and data communications to business customers across the U.S.

Under the terms of the agreement, Qwest will purchase the Allegiance assets for approximately $300 million in cash. In addition, Qwest will issue approximately $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5 percent. Allegiance currently carries approximately $550 million annually in telecommunications traffic across these assets. Qwest plans to combine and optimize this traffic – with its existing network traffic – in the most
cost-efficient manner in 2004.

The agreement is subject to approval by the U.S. Bankruptcy Court and certain other government regulatory agencies. Allegiance has filed a motion with the Bankruptcy Court to begin a sale process in which Qwest will be designated as the stalking horse bidder and other interested potential bidders will have an opportunity to offer higher bids for the assets of Allegiance. If Qwest is successful in the bidding process, the company expects to close on the transaction in 2004.
“Upon closing of this transaction, Qwest will have more POPs than any other inter-exchange carrier in the U.S., allowing us to better serve existing customers and immediately expand our ability to serve more businesses than ever before,” said Richard C. Notebaert, Qwest chairman and CEO. “With these assets, we expect to improve Qwest’s profitability and expand our delivery of end-to-end communications solutions to businesses nationwide.”

Qwest and Allegiance emphasized that they are committed to ensuring that Allegiance customers continue to receive quality service as the Allegiance bankruptcy process is resolved and its customers are transitioned to Qwest.

Qwest expects to achieve significant cost synergies by using Allegiance’s local network POPs to connect Qwest’s network to business customers. The company expects this acquisition to drive profitable revenue and generate savings in access payments; eliminate duplicative sales and administrative expenses; reduce capital and network operating expenses; and greatly improve Qwest’s ability to activate new services for customers. In addition, the expanded access to local network facilities in key U.S. markets will help support the company’s delivery of new enterprise communications services, such as Voice-over-IP.

“A Qwest-Allegiance pairing would dramatically increase competition in the telecom industry and would result in the first large scale out-of region competitor for local telephone service between the regional Bell companies---a huge benefit to medium and small businesses,” said Royce Holland, chairman and chief executive officer of Allegiance Telecom.

Allegiance Telecom is a facilities-based national local exchange carrier headquartered in Dallas, Texas. Allegiance offers competitive local service for medium and small businesses, and a complete package of telecommunications services, including local, long-distance, international calling, high-speed data transmission and Internet services. Allegiance serves 36 major metropolitan areas in the U.S. The company is currently pursuing financial restructuring under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filings were announced May 14, 2003, and were made in the U.S. Bankruptcy Court in the Southern District of New York.


About Qwest:
Qwest Communications International Inc. is a leading provider of voice, video and data services to more than 25 million customers. The company’s 47,000 employees are committed to the “Spirit of Service” and providing world-class services that exceed customers’ expectations for quality, value and reliability.

For more information on Qwest, please visit: www.qwest.com