As filed with the Securities and Exchange Commission on June 21, 1999
Registration No. ___-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
QWEST COMMUNICATIONS INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 4183 84-1339282
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
700 Qwest Tower
555 Seventeenth Street
Denver, Colorado 80202
(303) 992-1400
(Address, Including Zip Code, and Telephone Number, including Area Code, of Registrant's Principal Executive Offices)
-----------------------
Robert S. Woodruff
Qwest Communications
International Inc.
700 Qwest Tower
555 Seventeenth Street
Denver, Colorado 80202
(303) 992-1400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
-----------------------
copies to:
Dennis S. Hersch
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
</TABLE>
Approximate Date of Commencement of Proposed Sale to the Public: As soon
as practicable after the effectiveness of this Registration Statement and the
effective time of (i) the merger of a wholly-owned subsidiary of the Registrant
with and into U S WEST, Inc. as described in the Agreement and Plan of Merger
dated as of June [__], 1999 and (ii) the merger of a wholly-owned subsidiary of
the Registrant with and into Frontier Corporation as described in the Agreement
and Plan of Merger dated as of June [__], 1999.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. o
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
<TABLE>
-----------------------
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of each Class of Amount to be Offering Price Per Aggregate Offering Registration
Securities to be Registered Registered Unit Price Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock in connection with the U S WEST, 897,907,706 $28,484,523,068 $7,918,697
Inc. merger, with par value of $.01 per share.. (1) N/A (2) (3)
===========================================================================================================================
Common Stock in connection with the Frontier 212,316,492 $9,984,806,459 $2,775,776
Corporation merger with par value of $.01 per (4) N/A (5) (6)
share..........................................
============================================================================================================================
Totals.........................................1,110,224,198 N/A $38,469,329,527 $10,694,473
============================================================================================================================
</TABLE>
(1) The maximum number of shares of Qwest common stock issuable in connection
with the U S WEST merger in exchange for shares of U S WEST common stock,
based on (i) the number of shares of common stock outstanding on April 22,
1999 as reported in U S WEST's quarterly report Form 10-Q for the quarter
ended March 31, 1999 (503,593,778 shares) and (ii) the highest
exchange ratio applicable in the U S WEST merger (1.783 shares of Qwest
common stock for each share of U S WEST common stock in the event that
the Frontier merger is consummated).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based
on the market value of the U S WEST shares to be received by Qwest in the
U S WEST merger, as established by the average of the high and low sales
prices of U S WEST common stock on June 16, 1999 on the consolidated tape,
which was $56.5625.
(3) This fee has been calculated pursuant to Section 6(b) of the Securities
Act, as .0278 of one percent of $28,484,523,068.
1
<PAGE>
(4) The maximum number of shares of Qwest common stock issuable in connection
with the Frontier merger in exchange for shares of Frontier common stock,
based on (i) the number of shares of common stock outstanding on April
30, 1999 as reported in Frontier's quarterly report Form 10-Q for the
quarter ended March 31, 1999 (173,178,215 shares) and (ii) the highest
exchange ratio applicable in the Frontier merger (1.226 shares of Qwest
common stock for each share of Frontier common stock in the event that
the U S WEST merger is consummated).
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based
on the market value of the Frontier shares to be received by Qwest in the
Frontier merger, as established by the average of the high and low sales
prices of Frontier common stock on June 17, 1999 on the consolidated tape,
which was $57.65625.
(6) This fee has been calculated pursuant to Section 6(b) of the Securities
Act, as .0278 of one percent of $9,984,806,459.
-----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
2
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
CROSS REFERENCE SHEET
<TABLE>
<S> <C>
ITEM NUMBER LOCATION IN JOINT PROXY
- -----------------------------------------------------------------------------------------------------------------
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus...... Facing Page of the Registration Statement; Outside Front
Cover Page of Joint Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus................................... Where You Can Find More Information; Table of
Contents; Comparative Per Share Data
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................... Outside Front Cover Page of Prospectus; Summary;
Interests of Certain Persons in the Mergers; Selected
Financial Data; Unaudited Pro Forma Condensed Combined
Financial Information; The Merger Transactions;
Comparative Per Share Market Price and Dividend
Information; The U S WEST Merger Agreement; The
Frontier Merger Agreement; Chapter Two - Information
About the Meetings and Voting
4. Terms of the Transaction........................ Outside Front Cover Page of Prospectus; Summary; The
Merger Transactions; The U S WEST Merger
Agreement; The Frontier Merger Agreement; Chapter
Two - Information About the Meetings and Voting;
Chapter Three - Certain Legal Information.
5. Pro Forma Financial Information................. Unaudited Pro Forma Condensed Combined Financial
Statements.
6. Material Contacts with the Companies Being
Acquired........................................ *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters.............................. *
8. Interests of Named Experts and Counsel.......... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
3
<PAGE>
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants..... Summary; The Merger Transactions; Where You Can
Find More Information
11. Incorporation of Certain Information by
Reference....................................... *
12. Information with Respect to S-2 and S-3
Registrants..................................... *
13. Incorporation of Certain Information by
Reference....................................... Where You Can Find More Information
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants............... *
C. INFORMATION ABOUT THE COMPANIES
BEING ACQUIRED
15. Information with Respect to S-3
Companies....................................... Summary; The Merger Transactions; Where You Can
Find More Information
16. Information with Respect to S-2 or S-3
Companies....................................... *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies................. *
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited.............. Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Summary; Interests of Certain
Persons in the Mergers; The Merger Transactions; The U
S WEST Merger Agreement; The Frontier Merger
Agreement; The Frontier Stock Option Agreement; The
Voting Agreements; Chapter Two - Information About
the Meetings and Voting; Chapter Three - Certain Legal
Information; Where You Can Find More Information
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer......................... *
- -------------------
* Omitted because the Item is inapplicable or the answer is negative.
</TABLE>
4
<PAGE>
[PRELIMINARY DRAFT DATED JUNE 21, 1999, SUBJECT TO COMPLETION]
QWEST COMMUNICATIONS INTERNATIONAL INC.
IMPORTANT NOTICE
The information contained in this joint proxy statement/prospectus is highly
preliminary and subject to change. It is presented by Qwest Communications
International Inc. ("Qwest") in order to describe transactions between Qwest
and U S WEST, Inc. ("U S WEST"), on the one hand, and Qwest and Frontier
Corporation ("Frontier"), on the other hand, that would occur if and only if
the transactions proposed by Qwest to U S West and Frontier on June 13, 1999
were accepted in the forms described in this joint proxy statement/prospectus.
Both U S WEST and Frontier are parties to agreements with Global Crossing Ltd.
that prohibit U S WEST and Frontier from discussing with Qwest the
transactions proposed by Qwest except in limited circumstances. At this date,
neither U S WEST nor Frontier has indicated that it intends to discuss the
proposal with Qwest or to accept Qwest's proposal, either in its current form
or in some other form that might subsequently be proposed by Qwest, U S WEST,
Frontier or any other person. There can be no assurance that either Qwest
proposal will be accepted, or that if either Qwest proposal were accepted,
whether the proposal would be accepted in its current form or in some other
form.
This joint proxy statement/prospectus does not constitute or commence a tender
offer or exchange offer for any securities of U S WEST or Frontier. This joint
proxy statement/prospectus also does not, at this date, constitute or commence
a proxy solicitation for any matter that is subject to, or may be submitted
for, approval by the shareholders of either U S WEST or Frontier. Unless and
until Qwest enters into a transaction with U S WEST or Frontier or both and
revises this joint proxy statement/prospectus accordingly, shareholders of U S
WEST and Frontier should not tender any securities for purchase by Qwest or
deliver to Qwest a proxy to vote any shares of U S WEST or Frontier common
stock with respect to any matter whatsoever.
The joint proxy statement/prospectus is prepared on the assumption that it is
a joint proxy statement/prospectus of Qwest, U S WEST and Frontier. As of this
date, the boards of directors of U S WEST and Frontier have not reviewed or
approved this joint proxy statement/prospectus, approved the transactions
proposed by Qwest or called meetings for their shareholders to consider
approving the transactions. The actual joint proxy statement/prospectus for
any transaction or transactions that may be entered into between Qwest, on the
one hand, and U S WEST and Frontier, on the other hand, may differ
substantially from this joint proxy statement/prospectus.
Information in this joint proxy statement/prospectus is presented only as of
the date hereof. We do not intend to file an amended or revised joint proxy
statement/prospectus unless and until we enter into a transaction with U S
WEST or Frontier or both.
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the Qwest stock to be issued under this Joint Proxy
Statement/Prospectus or determined if this Joint Proxy Statement/Prospectus is
accurate or adequate. Any representation to the contrary is a criminal
offense.
- -------------------------------------------------------------------------------
Joint Proxy Statement/Prospectus dated _____ __, 1999, and first mailed
to shareholders on __________, 1999.
<PAGE>
TABLE OF CONTENTS
CHAPTER ONE - THE MERGERS
QUESTIONS AND ANSWERS ABOUT THE
MERGERS..................................................................I-1
SUMMARY.....................................................................I-2
The Companies............................................................I-2
Reasons for the Mergers..................................................I-2
The Mergers..............................................................I-2
THE MERGER TRANSACTIONS.....................................................I-8
General..................................................................I-8
U S WEST and Frontier Information........................................I-9
Background of the Mergers................................................I-9
Our Reasons for the Mergers.............................................I-15
Recommendations of Our Boards of Directors..............................I-15
Accounting Treatment....................................................I-15
Material Federal Income Tax Consequences of
the Mergers..........................................................I-16
Regulatory Matters Relating to the U S WEST
Merger...............................................................I-18
Regulatory Matters Relating to the Frontier
Merger...............................................................I-19
Appraisal Rights........................................................I-20
Federal Securities Laws Consequences; Stock
Transfer Restriction Agreements......................................I-20
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION................................................I-22
SELECTED FINANCIAL DATA....................................................I-23
COMPARATIVE PER SHARE DATA.................................................I-28
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION..........................................I-29
OPINIONS OF FINANCIAL ADVISORS.............................................I-45
INTERESTS OF CERTAIN PERSONS IN THE
MERGERS.................................................................I-46
THE U S WEST MERGER AGREEMENT..............................................I-47
Structure of the Merger.................................................I-47
Timing of Closing.......................................................I-47
Merger Consideration....................................................I-47
Treatment of U S WEST Stock Options.....................................I-47
Exchange of Shares......................................................I-48
Qwest Board.............................................................I-48
Certain Covenants.......................................................I-48
Representations and Warranties..........................................I-49
Conditions to the Completion of the Merger..............................I-50
Termination of the Merger Agreement.....................................I-50
Other Expenses..........................................................I-52
Amendments and Waivers..................................................I-52
THE FRONTIER MERGER AGREEMENT..............................................I-54
Structure of the Merger.................................................I-54
Timing of Closing.......................................................I-54
Merger Consideration....................................................I-54
Treatment of Frontier Stock Options and
Warrants.............................................................I-54
Exchange of Shares......................................................I-55
Qwest Board.............................................................I-55
Certain Covenants.......................................................I-55
Representations and Warranties..........................................I-57
Conditions to the Completion of the Merger..............................I-57
Termination of the Merger Agreement.....................................I-58
Other Expenses..........................................................I-60
Amendments; Waivers.....................................................I-60
FRONTIER STOCK OPTION AGREEMENT............................................I-61
VOTING AGREEMENTS..........................................................I-62
CHAPTER TWO- INFORMATION ABOUT THE
MEETINGS AND VOTING
Matters Relating to the Meetings........................................II-1
Vote Necessary to Approve Qwest, U S WEST
and Frontier Proposals...............................................II-3
Proxies.................................................................II-3
Other Business; Adjournments............................................II-5
CHAPTER THREE - CERTAIN LEGAL
INFORMATION
COMPARISON OF QWEST-U S WEST
SHAREHOLDER RIGHTS.....................................................III-1
Summary of Material Differences Between
Current Rights of U S WEST Shareholders
and Rights Those Shareholders Will Have as
Qwest Shareholders Following the U S
WEST Merger.........................................................III-1
COMPARISON OF QWEST-FRONTIER
SHAREHOLDER RIGHTS.....................................................III-3
Summary of Material Differences Between
Current Rights of Frontier Shareholders and
Rights Those Shareholders Will Have as
Qwest Shareholders Following the Frontier
Merger..............................................................III-3
<PAGE>
DESCRIPTION OF QWEST CAPITAL STOCK........................................III-5
Authorized Capital Stock...............................................III-5
Qwest Common Stock.....................................................III-5
Qwest Preferred Stock..................................................III-5
Amendment of the Qwest Charter.........................................III-6
Transfer Agent and Registrar...........................................III-7
Stock Exchange Listing; Delisting and
Deregistration of U S WEST and Frontier
Common Stock........................................................III-7
INFORMATION REGARDING FORWARD-
LOOKING STATEMENTS.....................................................III-7
LEGAL MATTERS.............................................................III-8
EXPERTS...................................................................III-8
CHAPTER FOUR - ADDITIONAL
INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS...............................................IV-1
Qwest...................................................................IV-1
U S WEST................................................................IV-1
Frontier................................................................IV-1
WHERE YOU CAN FIND MORE
INFORMATION.............................................................IV-2
ii
<PAGE>
CHAPTER ONE
THE MERGERS
SEE CAUTIONARY NOTE ON COVER PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q: When and where are the shareholder meetings?
A: The shareholder meeting of Qwest Communications International Inc. ("Qwest")
will take place on [__________], 1999 in Denver, Colorado. The shareholder
meeting of U S WEST, Inc. ("U S WEST") will take place on [__________], 1999
in _________, _________. The shareholder meeting of Frontier Corporation
("Frontier") will take place on [___________], 1999 in _________, _________.
Q: What do I need to do now?
A: Just mail your signed proxy card in the enclosed return envelope or vote by
telephone or the internet, as soon as possible, so that your shares may be
represented at your meeting. In order to assure that your vote is obtained,
please give your proxy as instructed on your proxy card even if you currently
plan to attend your meeting in person.
Q: What should I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to your company's Secretary
or vote again by telephone or the internet before your meeting. Or, you can
attend your meeting in person and vote. You may also revoke your proxy by
sending a notice of revocation to your company's Secretary at the address
under "Summary- The Companies".
Q: If my shares are held in "street name" by my
broker, will my broker vote my shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on the
mergers. You should therefore be sure to provide your broker with instructions
on how to vote your shares. Please check the voting form used by your broker
to see if it offers telephone or internet voting. If you are a Qwest
shareholder and do not give voting instructions to your broker, you will not
be counted as voting for purposes of your merger proposals unless you appear
in person at the Qwest meeting.
If you are a U S WEST or Frontier shareholder and do not give voting
instructions to your broker, you will, in effect, be voting against your
merger unless you appear in person at your shareholder meeting and vote in
favor of your merger.
Q: Should I send in my stock certificates now?
A: No. If the mergers are completed, we will send U S WEST and Frontier
shareholders written instructions for exchanging their share certificates.
Qwest shareholders will keep their existing certificates.
Q: What happens to my future dividends?
A: We expect no changes in the dividend policies of any of the three companies
before the mergers. The payment of dividends by the combined company in the
future, however, will depend on business conditions, the combined company's
financial condition and earnings, and other factors.
Q: When do you expect the mergers to be completed?
A: We are working towards completing the mergers as quickly as possible. In
addition to shareholder approvals, we must also obtain regulatory approvals.
We hope to complete the mergers by [___________].
Q: Who do I call if I have questions about the meetings or the mergers?
A: Qwest shareholders may call 1-800-[___]-[____].
U S WEST shareholders may call 1-800-[___]-[____].
Frontier shareholders may call 1-800-[___]-[____].
I-1
<PAGE>
Chapter One - The Merger
- -------------------------------------------------------------------------------
AS OF THE DATE OF FILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NO MERGER
AGREEMENT HAS BEEN EXECUTED BETWEEN QWEST AND U S WEST OR BETWEEN QWEST AND
FRONTIER. THE FOLLOWING DESCRIPTION DESCRIBES PROVISIONS IN QWEST'S MERGER
PROPOSALS TO U S WEST AND FRONTIER THAT WOULD OCCUR IF AND ONLY IF THE
TRANSACTIONS PROPOSED BY QWEST TO U S WEST AND FRONTIER ON JUNE 13, 1999 WERE
ACCEPTED IN THEIR CURRENT FORM.
- -------------------------------------------------------------------------------
SEE CAUTIONARY NOTE ON COVER PAGE
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the mergers fully and for a more complete
description of the legal terms of the mergers, you should read this document
and the documents we have referred you to carefully.
See "Where You Can Find More Information".
The Companies
Qwest Communications International Inc.
700 Qwest Tower
555 Seventeenth Street
Denver, CO 80202
(303) 992-1400
Qwest's principal business is internet-based data, voice and image
communications for businesses and consumers. Qwest has international
operations throughout North America, Europe and Mexico, and has developed a
state of the art high-capacity network for international telecommunications.
U S WEST, Inc.
1801 California Street
Denver, CO 80202
(303) 672-2700
U S WEST's principal business is telecommunications services, including local
telephone services, exchange access services, domestic and international
broadband communications, wireless communications and directories services.
Frontier Corporation
180 South Clinton Avenue
Rochester, NY 14646
(716) 777-1000
Frontier's principal business is local and long distance telephone
communications services and wireless communications services, including voice
and data communication services and value added services. The company also
markets and installs telecommunications systems and equipment.
Reasons for the Mergers
[To Come.]
The Mergers
The proposed merger agreements are attached as Annexes A and B, respectively,
to this joint proxy statement/prospectus. We encourage you to read the
proposed merger agreements as they are the legal documents that would govern
the mergers.
What U S WEST Shareholders Will Receive
As a result of the U S WEST merger, U S WEST shareholders will receive, for
each share of U S WEST common stock, ___ shares of Qwest common stock.
I-2
<PAGE>
Chapter One - The Merger
What Frontier Shareholders Will Receive
As a result of the Frontier merger, Frontier shareholders will receive, for
each share of Frontier common stock, ___ shares of Qwest common stock plus $20
in cash.
Ownership of Qwest After the Mergers
Qwest will issue approximately [______] shares of Qwest common stock to U S
WEST shareholders in the U S WEST merger and approximately [______] shares of
Qwest common stock to Frontier shareholders in the Frontier merger. The shares
of Qwest common stock to be issued to U S WEST shareholders in the U S WEST
merger will represent approximately [___]% of the outstanding Qwest common
stock after the mergers. The shares of Qwest common stock to be issued to
Frontier shareholders in the Frontier merger will represent approximately
[___]% of the outstanding Qwest common stock after the mergers. This
information is based on the number of Qwest, U S WEST and Frontier shares
outstanding on ________, 1999 and does not take into account stock options or
other equity-based awards.
Shareholder Vote Required to Approve the Mergers
For Qwest shareholders: Approval of the issuance of stock in the U S WEST and
Frontier mergers requires the affirmative vote of at least a majority of the
votes cast by the holders of Qwest common stock.
For U S WEST shareholders: Approval of the U S WEST merger requires the
affirmative vote of at least a majority of the outstanding shares of U S WEST
common stock.
For Frontier shareholders: Approval of the Frontier merger requires the
affirmative vote of at least two-thirds of the outstanding shares of Frontier
common stock.
Consummation of the U S WEST merger is not conditioned on consummation of the
Frontier merger, and consummation of the Frontier merger is not conditioned on
consummation of the U S WEST merger.
Conditions to the Completion of the U S WEST
Merger
The completion of the U S WEST merger depends upon meeting a number of
conditions, including the following:
o approval by the Qwest and U S WEST shareholders;
o expiration or termination of the waiting period under the
Hart-Scott-Rodino Act and receipt of material regulatory approvals;
o absence of any law or court order prohibiting the U S WEST merger;
o receipt of opinions of Qwest's and U S WEST's counsel that the U S WEST
merger will qualify as a tax-free reorganization; and
o material accuracy as of closing of the representations and warranties
made by the other party.
Conditions to the Completion of the Frontier Merger
The completion of the Frontier merger depends upon meeting a number of
conditions, including the following:
o approval by the Qwest and Frontier shareholders;
o expiration or termination of the waiting period under the
Hart-Scott-Rodino Act and receipt of material regulatory approvals;
o absence of any law or court order prohibiting the Frontier merger;
o receipt of opinions of Qwest's and Frontier's counsel that the Frontier
merger will qualify as a tax-free reorganization; and
o material accuracy as of closing of the representations and warranties
made by the other party.
I-3
<PAGE>
Chapter One - The Merger
Termination of the U S WEST Merger Agreement
Either Qwest or U S WEST can terminate the U S WEST merger agreement if any of
the following occurs:
(1) we do not complete the U S WEST merger by _________, ____ - however, that
date becomes _________, ____ if we have not closed by _________, ____
because the regulatory conditions specified in the U S WEST merger
agreement have not been satisfied by that date; or
(2) Qwest or U S WEST shareholders do not give the required approvals; or
(3) a law or court order permanently prohibits the U S WEST merger; or
(4) the other party breaches the U S WEST merger agreement in a manner that
renders a condition to the U S WEST merger incapable of being satisfied
prior to ____________; or
(5) the other party's board of directors modifies its recommendation of the
U S WEST merger and U S WEST merger agreement in a manner adverse to the
party seeking to terminate; or
(6) its board of directors determines, after receipt
of a superior proposal, that failure to terminate
the U S WEST merger agreement in order to
accept the superior proposal would result in a
reasonable likelihood that it would breach its
fiduciary duties to its stockholders. However,
neither party may terminate under this
paragraph if:
o its stockholders have already approved the U S WEST merger,
o it has not given the other party five business days to match the
superior proposal, and
o it has not paid the other party the termination fee described below.
Neither Qwest nor U S WEST can terminate the U S WEST merger agreement as
described in paragraph (1) above if the U S WEST merger has not closed because
it is in breach of the U S WEST merger agreement.
Finally, Qwest and U S WEST can mutually agree to terminate the U S WEST
merger agreement.
Qwest-U S WEST Termination Fees
U S WEST must pay Qwest a termination fee of $850 million in cash if:
(1) the U S WEST merger agreement is terminated because the U S WEST board
of directors modifies its recommendation of the U S WEST merger and U S
WEST merger agreement in a manner adverse to Qwest, or
(2) the U S WEST merger agreement could have been terminated as described in
paragraph (1) above but was not and is subsequently terminated as a
result of the failure to obtain the U S WEST stockholder approval, or
(3) the U S WEST merger agreement is terminated by U S WEST so that U S WEST
can accept a superior proposal, or
(4) the U S WEST merger agreement is terminated in circumstances where:
o U S WEST's shareholders do not vote in favor of the U S WEST merger,
o a third party has made a proposal for an alternative transaction
involving U S WEST prior to the U S WEST shareholder vote, and
o within twelve months of the termination of the U S WEST merger
agreement U S WEST enters into an agreement for an alternative
transaction with any third party, or
(5) the U S WEST merger agreement is terminated as a result of U S WEST's
material breach of its covenants to fulfill its obligations regarding
the shareholder approval process.
Any termination fee payable by U S WEST to Qwest may be reduced by an amount of
up to $250 million
I-4
<PAGE>
Chapter One - The Merger
equal to the amount that U S WEST pays for capacity on Qwest's systems.
Qwest must pay U S WEST a termination fee of $850 million in cash if:
(1) the U S WEST merger agreement is terminated because the Qwest board of
directors modifies its recommendation of the U S WEST merger and U S
WEST merger agreement in a manner adverse to U S WEST, or
(2) the U S WEST merger agreement could have been terminated as described in
paragraph (1) above but was not and is subsequently terminated as a
result of the failure to obtain the Qwest stockholder approval, or
(3) the U S WEST merger agreement is terminated by Qwest so that Qwest can
accept a superior proposal, or
(4) the U S WEST merger agreement is terminated in circumstances where:
o Qwest's shareholders do not vote in favor of the U S WEST merger,
o a third party has made a proposal for an alternative transaction
involving Qwest prior to the Qwest shareholder vote, and
o within twelve months of the termination of the U S WEST merger
agreement Qwest enters into an agreement for an alternative
transaction with any third party, or
(5) the U S WEST merger agreement is terminated as a result of Qwest's
material breach of its covenants to fulfill its obligations regarding
the shareholder approval process.
Termination of the Frontier Merger Agreement
Either Qwest or Frontier can terminate the Frontier merger agreement if any of
the following occurs:
(1) we do not complete the Frontier merger by _________, 2000; or
(2) Qwest or Frontier shareholders do not give the required approvals; or
(3) a law or court order permanently prohibits the Frontier merger.
Neither Qwest nor Frontier can terminate the Frontier merger agreement as
described in paragraph (1) above if the Frontier merger has not closed because
it is in breach of the Frontier merger agreement.
In addition, Frontier can terminate the Frontier merger agreement if:
o its stockholders have not already approved the Frontier merger,
o it receives a proposal that is superior to the Frontier merger,
o it gives Qwest three business days to make an offer that is as
favorable to Frontier shareholders as the superior proposal, and
o it pays Qwest the termination fee described below.
In addition, Qwest can terminate the Frontier merger agreement if Frontier
modifies its recommendation of the Frontier merger and Frontier merger
agreement in a manner adverse to Qwest.
Finally, Qwest and Frontier can mutually agree to terminate the merger
agreement.
Qwest-Frontier Termination Fees
Frontier must pay Qwest a termination fee of $270 million in cash if:
(1) the Frontier merger agreement is terminated because Frontier modifies
its recommendation of the Frontier merger and Frontier merger agreement
in a manner adverse to Qwest, or
(2) Frontier terminates the Frontier merger agreement to accept a superior
proposal, or
(3) the Frontier merger agreement is terminated in circumstances where:
I-5
<PAGE>
Chapter One - The Merger
o Frontier's shareholders do not vote in favor of the Frontier merger,
o a third party has made a proposal for an alternative transaction
involving Frontier prior to the Frontier shareholder vote, and
o within twelve months of the termination of the Frontier merger
agreement Frontier enters into an agreement for an alternative
transaction with any third party or an alternative transaction with
any third party is consummated, or
(4) the Frontier merger agreement is terminated in circumstances where:
o the Frontier merger has not closed by _____________ or a law or
court order permanently restrains the closing of the Frontier
merger,
o prior to the applicable event specified in the preceding bullet
point, a third party has made a proposal for an alternative
transaction involving Frontier,
o after such proposal has been made but prior to termination,
Frontier intentionally materially breaches the Frontier merger
agreement, and
o within twelve months of the termination of the Frontier merger
agreement Frontier enters into an agreement for an alternative
transaction with any third party or an alternative transaction with
any third party is consummated.
Board of Directors of Qwest After the Mergers
Following the mergers, the board of directors of Qwest will have [__] members,
including [__] of the current Qwest directors, [___] directors designated by U
S WEST and [___] directors designated by Frontier. Qwest expects that Mr.
[________], Chairman of [______], will become the Vice- Chairman of Qwest.
Regulatory Approvals
Completion of the mergers will not occur until after receipt of certain
regulatory approvals required for the transactions. The Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, provides that certain required
materials and information must be furnished to and reviewed by the Antitrust
Division of the Justice Department or the Federal Trade Commission. In
addition, the mergers cannot be completed until permission is obtained from
the Federal Communications Commission and certain state public utility
commissions regarding the transfer of control of the U S WEST and Frontier
telephone operations. Qwest may find that other regulatory approvals are
required after it has an opportunity to conduct due diligence investigations
with respect to ancillary U S WEST and Frontier operations. None of these
regulatory approvals have been requested at this time. See "The Mergers--
Regulatory Matters Relating to the U S WEST Merger" and "The
Mergers--Regulatory Matters Relating to the Frontier Merger."
Material Federal Income Tax Consequences of the Mergers
A U S WEST shareholder's receipt of Qwest common stock in the U S WEST merger
generally will be tax-free for United States federal income tax purposes,
except for tax resulting from the receipt of cash instead of any fractional
share of Qwest common stock.
A Frontier shareholder's receipt of Qwest common stock in the Frontier merger
generally will be tax-free for federal income tax purposes, except for tax
resulting from the receipt of cash instead of any fractional share of Qwest
common stock and except for tax on any gain on that shareholder's Frontier
common stock to the extent of other cash received in the Frontier merger.
Frontier Stock Option Agreement
[To come.]
Voting Agreements
[To come.]
I-6
<PAGE>
Chapter One - The Merger
Comparative Per Share Market Price Information
Qwest common stock is quoted on the Nasdaq National Market and U S WEST and
Frontier common stock are both listed on the New York Stock Exchange. On June
11, 1999, the last full trading day before Qwest publicly announced its merger
proposals to U S WEST and Frontier, Qwest common stock closed at $44.875, U S
WEST common stock closed at $54.875, and Frontier common stock closed at
$55.4375. On June 18,
1999, the last full trading day before the filing of this joint proxy
statement/prospectus, Qwest common stock closed at $37.9375, U S WEST common
stock closed at $58.0, and Frontier common stock closed at $58.3125.
Listing of Qwest Common Stock
The shares of Qwest common stock to be issued in the mergers will be quoted on
the Nasdaq under the ticker symbol "QWST".
Appraisal Rights
The holders of Qwest and U S WEST common stock do not have any right to an
appraisal of the value of their shares in connection with the U S WEST merger.
The holders of Qwest and Frontier common stock do not have any right to an
appraisal of the value of their shares in connection with the Frontier merger.
Interests of Officers and Directors in the Merger
[To come.]
Accounting Treatment
The mergers will be accounted for using the purchase method of accounting.
I-7
<PAGE>
Chapter One - The Merger
SEE CAUTIONARY NOTE ON COVER PAGE
- -------------------------------------------------------------------------------
AS OF THE DATE OF FILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NO MERGER
AGREEMENT HAS BEEN EXECUTED BETWEEN QWEST AND U S WEST OR BETWEEN QWEST
AND FRONTIER. THE FOLLOWING DESCRIPTION DESCRIBES PROVISIONS IN QWEST'S MERGER
PROPOSALS TO U S WEST AND FRONTIER THAT WOULD OCCUR IF AND ONLY IF THE
TRANSACTIONS PROPOSED BY QWEST TO U S WEST AND FRONTIER ON JUNE 13, 1999 WERE
ACCEPTED IN THEIR CURRENT FORM.
- -------------------------------------------------------------------------------
THE MERGER TRANSACTIONS
General
The Qwest Board is using this joint proxy statement/prospectus to solicit
proxies from the holders of Qwest common stock for use at the Qwest meeting.
The U S WEST Board is also using this document to solicit proxies from the
holders of U S WEST common stock for use at the U S WEST meeting. The Frontier
Board is also using this document to solicit proxies from the holders of
Frontier common stock for use at the Frontier meeting.
Qwest Proposals
At the Qwest meeting, holders of Qwest common stock will be asked to vote
upon:
(1) approval of the issuance of Qwest common stock pursuant to an
Agreement and Plan of Merger dated as of [___________], 1999 among Qwest,
U S WEST and a wholly owned Qwest subsidiary,
(2) approval of the issuance of Qwest common stock pursuant to an
Agreement and Plan of Merger dated as of [__________], 1999 among Qwest,
Frontier and a wholly owned Qwest subsidiary, and
(3) approval of the amendment of the Qwest charter to increase the
number of authorized shares of Qwest common stock to [___] billion.
We sometimes refer to (1) and (2) collectively as the "Qwest merger
proposals" and to (3) as the "Qwest charter amendment proposal".
U S WEST Proposal
At the U S WEST meeting, holders of U S WEST common stock will be asked
to vote upon approval and adoption of the U S WEST merger agreement and the U
S WEST merger. We sometimes refer to this proposal as the "U S WEST merger
proposal".
Frontier Proposal
At the Frontier meeting, holders of Frontier common stock will be asked
to vote upon approval and adoption of the Frontier merger agreement and the
Frontier merger. We sometimes refer to this proposal as the "Frontier merger
proposal" and we sometimes refer to the Qwest merger proposals, the U S WEST
merger proposal and the Frontier merger proposal collectively as the "merger
proposals".
Approval of the merger proposals is conditioned on approval of the Qwest
charter amendment proposal. Approval of the Qwest charter amendment proposal
is not conditioned, however, on approval of the merger
I-8
<PAGE>
Chapter One - The Merger
proposals. Consummation of the U S WEST merger is not conditioned on
consummation of the Frontier merger, and consummation of the Frontier merger
is not conditioned on consummation of the U S WEST merger.
U S WEST and Frontier Information
While Qwest has included herein information concerning U S WEST and
Frontier insofar as it is known or reasonably available to Qwest, U S WEST and
Frontier are not affiliated with Qwest and neither U S WEST nor Frontier has
permitted Qwest access to its books and records. Therefore, information
concerning U S WEST and Frontier that has not been made public is not
available to Qwest. Qwest was not involved in the preparation of such
information and statements, is not in a position to verify any such
information or statements and accepts no responsibility for the accuracy or
completeness thereof.
Risk Factors
[To come.]
Background of the Mergers
[Further background to come.]
The Global Acquisition Proposals.
On March 16, 1999, Global, Frontier and GCF Acquisition Corp. ("Global
Merger Sub"), a wholly-owned subsidiary of Global, announced that they had
entered into the Original Global/Frontier Merger Agreement, under which Global
Merger Sub would merge into Frontier, causing Frontier to become a
wholly-owned subsidiary of Global, and the stockholders of Frontier would
receive a combination of cash and Global Common Stock. Under the Original
Global/Frontier Merger Agreement, each share of Frontier Common Stock was to
be exchanged for Global Common Stock valued at $62.00 per common share (with a
"collar" provision adjusting the exchange ratio to maintain a constant value
of Global Common Stock per Frontier share if the price of Global Common Stock
was within the collar). According to the materials filed by Frontier on Form
8-K on March 19, 1999 (the "Frontier March 8-K"), the Boards of Directors of
both Frontier and Global had approved the Original Global/Frontier Merger
Agreement, and shareholders of Global representing more than a majority of the
outstanding Global Common Stock agreed to vote their shares in favor of the
contemplated transactions. Frontier also agreed to grant Global an option to
purchase shares representing 19.9% of its outstanding common stock for $62.00
per share, exercisable upon termination of the Original Global/Frontier Merger
Agreement in certain circumstances. For additional information about the
Original Global/Frontier Merger Agreement, see the Frontier March 8-K.
On May 16, 1999, Global and U S WEST announced that they had entered into
the Global/U S WEST Merger Agreement, under which the shareholders of U S WEST
and Global/Frontier would become the owners of a newly-created holding company
to be named Global Crossing Corporation ("New Holdco"). U S WEST and Global
would become subsidiaries of New Holdco, and New Holdco would establish two
classes of tracking stock. The Class G stock would track the global data and
voice network and internet assets of New Holdco, and the Class L stock would
track the local telecommunications assets. Under the Global/U S WEST Merger
Agreement, each share of U S WEST stock would be exchanged for approximately
1.2 shares of New Holdco tracking stock, and each share of Global common stock
would be exchanged for one share of New Holdco tracking stock. Shareholders
could elect which class of tracking stock they would receive, subject to
proration based on an appraisal of the relative values of the two classes of
assets to be done shortly before closing. According to the materials filed by
U S WEST on Form 8-K on May 21, 1999 (the "U S WEST May 8-K") and the
materials filed by Global on Form 8-K on May 18, 1999 (the "Global May 8-K"),
the Boards of Directors of both U S WEST and Global had approved the Global/U
S WEST Merger Agreement, and shareholders of Global representing more than a
majority of the outstanding Global Common Stock agreed to vote their shares in
favor of the contemplated
I-9
<PAGE>
Chapter One - The Merger
transactions. In addition, according to the Schedule 14D-1 filed by U S WEST
on May 21, 1999 (as amended from time to time, the "U S WEST Schedule 14D-1"),
U S WEST agreed to make a cash tender offer (the "Tender Offer") for
approximately 9.5% of the outstanding Global Common Stock at a price of $62.75
per share. The Tender Offer expired on June 18, 1999. For additional
information about the Global/U S WEST Merger Agreement, see the U S WEST May
8-K and the Global May 8-K. For additional information about the Tender Offer,
see the U S WEST Schedule 14D-1.
Also on May 16, 1999, Global, Global Merger Sub and Frontier entered into
a Consent and Amendment No.1 to the Original Global/Frontier Merger Agreement
(as so amended, the "Global/Frontier Merger Agreement"), pursuant to which (1)
Frontier consented to the Global/U S WEST Merger Agreement and the Tender
Offer and (2) the consideration to be paid for each share of Frontier Common
Stock was increased to $63 per share ($62 if no shares were purchased in the
Tender Offer). For additional information regarding the amendment to the
Global/Frontier Merger Agreement, see the materials filed on Form 8-K on May
18, 1999 by Frontier.
[To be supplemented--further background to come.]
The Qwest Proposal to U S WEST.
On June 13, 1999, Philip F. Anschutz, Chairman of the Board of Qwest,
telephoned Solomon D. Trujillo, the Chairman, President and Chief Executive
Officer of U S WEST, to inform him that Qwest would be publicly announcing
that day an offer to acquire all of U S WEST for Qwest Common Stock. On that
same day, Joseph P. Nacchio, the Chairman and Chief Executive Officer of
Qwest, sent Mr. Trujillo the following letter.
June 13, 1999
Mr. Solomon D. Trujillo
Chairman, President and Chief Executive Officer
U S WEST, Inc.
1801 California Street
Denver, Colorado 80202
Dear Sol:
Qwest Communications International Inc. is pleased to offer to
acquire all of U S WEST, Inc. for Qwest common stock. Qwest will pay
1.738 shares of Qwest common stock for each share of U S WEST common
stock. Based on Friday's closing price for Qwest shares, our offer has a
value of $78.00 per share. We are also announcing our offer to acquire
Frontier Corporation in a stock and cash transaction valued at
approximately $13.6 billion and, in the event that Frontier accepts our
proposal and we enter into a merger agreement with Frontier, we will
increase the consideration payable to U S WEST shareholders to 1.783
shares of Qwest common stock having a value of $80.00 per U S WEST share.
If Frontier agrees to a business combination with us, our offer
would represent a 25.4% premium to the value of U S WEST's proposed
merger with Global Crossing Ltd. based on the closing price of Global
Crossing's shares on Friday, a 45.8% premium to Friday's closing price of
U S WEST and a 28.5% premium to the trading price of U S WEST prior to
the announcement of its merger agreement with Global Crossing. If we do
not conclude our business combination agreement with Frontier, our
proposal would still represent a 22.2% premium to the value of U S WEST's
proposed merger with Global Crossing, a 42.1% premium to Friday's closing
price of U S WEST and a 25.3% premium to the trading price of U S WEST
prior to the announcement of its merger agreement with Global Crossing.
I-10
<PAGE>
Chapter One - The Merger
Neither of our acquisition proposals is conditioned upon the
success of the other proposal and Qwest is prepared to enter into a
binding agreement with U S WEST whether or not we conclude our
transaction with Frontier.
Upon consummation of the transaction, we will invite you to become
Vice Chairman of the Qwest Board and we would expect to invite up to four
members of the current U S WEST Board, including you, to join the Qwest
Board.
The combination of our two companies will allow us to combine the
management talents of both organizations. We expect an extremely smooth
transition given the fact that we are -- and will remain -- headquartered
in Denver.
The combination of our two companies is truly a powerful opportunity
for our respective shareholders, employees and customers. The combination
will accelerate the delivery of Internet-based broadband communications
services to a large customer base and, by bringing together the network
infrastructure, applications and services as well as the customer
distribution channels of our companies, will create a truly worldwide
internet communications powerhouse.
We believe that the combination will result in significant operating
synergies, aggregating approximately $9.1 billion to $10.1 billion
through the year 2005 from our combination and $14 billion through the
year 2005 from a combination of U S WEST, Frontier and Qwest. These
synergies are comprised of (i) incremental revenues as the combined
company expands its local, data, IP and long-distance service; (ii)
operating cost savings in areas such as network operations and
maintenance, sales and marketing, billing, customer and back office
support as well as in procurement efficiencies; and (iii) capital savings
by eliminating duplication of the companies planned network buildouts and
in other infrastructure and back-office areas. We are prepared to meet
with you to discuss the analysis performed by us that underlies these
synergies and demonstrates their feasibility. Our analysis of synergies
is based on our analysis of information concerning you that is publicly
available, and we would expect that working with you we could identify
significantly greater synergies resulting from a combination of our two
companies.
Our proposal is financially superior to your pending transaction
with Global Crossing. Not only will your shareholders receive a higher
price for their U S WEST shares in a simpler transaction structure, but
they will also receive a superior stock reflecting Qwest's premier
assets, management's operating record, strong growth prospects and the
greater realizable synergies resulting from our combination.
Qwest's principal shareholder has indicated its readiness to enter
into a voting agreement concerning its obligation to vote in favor of the
merger at the meeting of Qwest shareholders comparable to the agreement
entered into by Global Crossing's controlling shareholders.
We are confident of our ability to complete this transaction as
quickly as the proposed Global Crossing merger. Our legal advisors are
confident of our ability to obtain all necessary approvals in a timely
manner and we are prepared to commit to take steps, including disposition
of certain operations, required to obtain such consents. Our offer will
be tax-free to U S WEST shareholders and we can provide tax treatment and
tax consequences of our proposed transaction equivalent to those of the
Global Crossing transaction.
We believe that our merger is fully consistent with the policy
underlying the Telecommunications Act of 1996 and is strongly in the
public interest. While obtaining regulatory approval under Section 271 of
the Telecommunications Act is not a condition of the closing of our
transaction, we would ask you to make the same commitments you have made
in connection with the Global Crossing transaction to accelerate the
process of obtaining such approval.
I-11
<PAGE>
Chapter One - The Merger
Given the clear superiority of our offer to the proposed Global
Crossing merger, we would like to meet with you and your advisors as soon
as possible to finalize a definitive agreement between our companies. The
offer is, of course, subject to entering into such an agreement. In this
regard, we are ready to enter into a merger agreement substantially
similar to the Global Crossing agreement. A copy of the proposed merger
agreement is attached to this letter. We are also ready to exchange
confidential information. Qwest is committed to bringing the combination
between our companies to a successful conclusion and we would be
delighted to discuss any aspect of our proposal.
We look forward to meeting at the earliest opportunity to conclude
this mutually beneficial transaction for both our companies. Please
forward to us the form of confidentiality agreement we are required to
execute to further this matter. In addition, we and our advisors will be
happy to meet with U S WEST at the time of your choosing to answer any
questions about our proposal. A list of persons who may be contacted at
Qwest and at our financial and legal advisors is attached to this letter.
Sincerely,
/s/ Joseph P. Nacchio
------------------------
Joseph P. Nacchio
The Qwest Proposal to Frontier.
On June 13, 1999, Mr. Anschutz telephoned Joseph P. Clayton, the Chief
Executive Officer of Frontier, to inform him that Qwest would be publicly
announcing that day an offer to acquire all of Frontier for cash and Qwest
Common Stock. On that same day, Mr. Nacchio sent Mr. Clayton the following
letter.
June 13, 1999
Mr. Joseph P. Clayton
Chief Executive Officer
Frontier Corporation
180 South Clinton Avenue
Rochester, New York 14646
Dear Joe:
Qwest Communications International Inc. is pleased to offer to
acquire all of Frontier Corporation for cash and Qwest common stock.
Qwest will pay $20 in cash and 1.181 shares of Qwest common stock for
each share of Frontier common stock. Based on Friday's closing price for
Qwest shares, our cash and stock offer has a value of $73.00 per Frontier
share. We are also announcing our offer to acquire U S WEST, Inc. in a
stock-for-stock transaction having total equity market value of
approximately $41.3 billion and, in the event that U S WEST accepts our
proposal and we enter into a merger agreement with U S WEST, we will
increase the consideration payable to Frontier shareholders to $20 in
cash and 1.226 shares of Qwest common stock having a total value of
$75.00 per Frontier share.
The stock portion of our offer will be tax-free to Frontier
shareholders. If U S WEST agrees to a business combination with us, our
offer would represent a 19% premium to the value of Frontier's proposed
merger with Global Crossing Ltd. based on the closing price of Global
Crossing's shares on Friday, a 35.3% premium to Friday's closing price of
Frontier and a 68.1% premium to the trading price of Frontier prior to
the announcement of its merger agreement with Global Crossing. If we do
not conclude our business combination agreement with U S WEST, our
proposal would still represent a 15.9% premium to the value of Frontier's
I-12
<PAGE>
Chapter One - The Merger
proposed merger with Global Crossing, a 31.7% premium to Friday's closing
price of Frontier and a 63.6% premium to the trading price of Frontier
prior to the announcement of its merger agreement with Global Crossing.
Neither of our acquisition proposals is conditioned upon the success
of the other proposal and Qwest is prepared to enter into a binding
agreement with Frontier whether or not we conclude our transaction with U
S WEST.
Upon consummation of the transaction, we will invite up to two of
Frontier's current directors, including you, to join the Qwest Board.
The combination of our two companies is truly a powerful opportunity
for our respective shareholders, employees and customers. The combination
will accelerate the delivery of Internet-based broadband communications
services to a large customer base and, by bringing together the network
infrastructure, applications and services as well as the customer
distribution channels of our companies, will create a truly worldwide
internet communications powerhouse.
We believe that the combination will result in significant operating
synergies, aggregating approximately $4 billion to $4.5 billion through
the year 2005 from our combination and $14 billion through the year 2005
from a combination of U S WEST, Frontier and Qwest. These synergies are
comprised of (i) incremental revenues as the combined company expands its
local, data, IP and long-distance service; (ii) operating cost savings in
areas such as network operations and maintenance, sales and marketing,
billing, customer and back office support as well as in procurement
efficiencies; and (iii) capital savings by eliminating duplication of the
companies planned network buildouts and in other infrastructure and
back-office areas. We are prepared to meet with you to discuss the
analysis performed by us that underlies these synergies and demonstrates
their feasibility. Our analysis of synergies is based on our analysis of
information concerning you that is publicly available, and we would
expect that working with you we could identify significantly greater
synergies resulting from a combination of our two companies.
Our proposal is financially superior to your pending transaction
with Global Crossing. Not only will your shareholders receive a higher
price for their Frontier shares in a simpler transaction structure, but
they will also receive a superior stock reflecting Qwest's premier
assets, management's operating record, strong growth prospects and the
greater realizable synergies resulting from our combination.
Qwest's principal stockholder has indicated its readiness to enter
into a voting agreement concerning its obligation to vote in favor of the
merger at the meeting of Qwest shareholders comparable to the agreement
entered into by Global Crossing's controlling shareholders.
We are confident of our ability to complete this transaction as
quickly as the proposed Global Crossing merger. Our offer contains no
financing contingencies. Qwest has received financing commitments from
Donaldson, Lufkin & Jenrette Capital Funding, Inc. and Bank of America,
NT & SA to supplement its existing cash reserves for the purpose of
funding the cash portion of the consideration to be paid to Frontier
shareholders and to pay the transaction fees and expenses.
We believe that our merger is fully consistent with the policy
underlying the Telecommunications Act of 1996 and is strongly in the
public interest. Our legal advisors are confident of our ability to
obtain all necessary approvals in a timely manner.
Given the clear superiority of our offer to the proposed Global
Crossing merger, we would like to meet with you and your advisors as soon
as possible to finalize a definitive agreement between our companies. The
offer is, of course, subject to entering into such an agreement. In this
regard, we are ready to enter into a merger agreement substantially
similar to the Global Crossing agreement. A copy of the proposed merger
I-13
<PAGE>
Chapter One - The Merger
agreement is attached to this letter. We are also ready to exchange
confidential information immediately. Qwest is committed to bringing the
combination between our companies to a successful conclusion and we would
be delighted to discuss any aspect of our proposal.
We look forward to meeting at the earliest opportunity to conclude
this mutually beneficial transaction for both our companies. Please
forward to us the form of confidentiality agreement we are required to
execute to further this matter. In addition, we and our advisors will be
happy to meet with Frontier at any time to answer any questions about our
proposal. A list of persons who may be contacted at Qwest and at our
financial and legal advisors is attached to this letter.
Sincerely,
/s/ Joseph P. Nacchio
------------------------
Joseph P. Nacchio
On Monday, June 14, 1999, Qwest filed with the Commission on Form 8-K
copies of the letters set forth above, a press release relating to the
proposed transactions, and related presentation materials.
On Monday, June 14, 1999, Global issued a press release stating that it
believed that its proposals were superior to the Qwest proposals and that it
expected that the mergers would close as planned according to its
previously-announced timetable.
On Thursday, June 17, 1999, Frontier issued the following press release:
Frontier Corporation announced today that its Board of Directors has
reviewed the unsolicited acquisition offer made by Qwest Communications
International Inc. and has determined to take no action with respect to
the offer at this time. The Board took into consideration, among other
things, the uncertainties surrounding Qwest's simultaneous bid for U S
WEST, the financial terms and structure of the Qwest proposal, current
market conditions, and the terms of the existing Frontier/Global Crossing
Ltd. merger agreement.
Frontier's Board directed management to continue to monitor events
related to the Qwest proposal, and the Board will take such actions as it
deems to be in the best interests of the shareholders of Frontier,
consistent with the existing Global Crossing merger agreement.
"Our Board discussed the Qwest offer, its impact on our
shareholders, and its interplay with the separate Qwest offer to acquire
U S WEST. We have carefully evaluated the bid, and we have discussed the
issues at length with our advisors," said Frontier Chief Executive
Officer Joseph P. Clayton. "The current circumstances surrounding the
Qwest proposal do not warrant any change at this time in our current
initiatives that are designed to move Frontier's transaction with Global
Crossing toward a prompt closing."
Added Clayton, "We remain excited about the strategic and financial
benefits of the Global Crossing transaction, including the value
certainty it delivers to our shareholders. We will, of course, continue
to monitor events and, where appropriate, respond in our shareholders'
best interests."
Later on Thursday, June 17, 1999, U S WEST issued the following press
release:
U S WEST, Inc. announced today that on June 13, 1999, Qwest
Communications International Inc. ("Qwest") publicly announced that it
has made an offer to acquire through a merger, all of the outstanding
shares of Common Stock of U S WEST, Inc. Qwest stated that it will
exchange 1.738 shares of Qwest Common Stock for each share of U S WEST,
Inc.'s Common Stock. In addition, Qwest concurrently publicly
I-14
<PAGE>
Chapter One - The Merger
announced that it was offering to acquire all of the outstanding shares
of Common Stock of Frontier Corporation. In the event Frontier
Corporation enters into a definitive agreement with Qwest with respect to
the acquisition of Frontier Corporation by Qwest, Qwest has indicated
that it will increase the consideration it is offering to 1.783 shares of
Qwest Common Stock for each share of U S WEST, Inc.'s Common Stock.
Qwest's proposal is subject to other terms and conditions. The Qwest
proposal is not subject to completion of, or termination of, the tender
offer. In addition, Qwest sent a letter to Mr. Solomon D. Trujillo, the
Chairman, President and Chief Executive Officer of U S WEST, Inc.,
setting forth the foregoing proposal.
Notwithstanding the Qwest proposal, pursuant to the Tender Offer and
Purchase Agreement between U S WEST, Inc. and Global Crossing Ltd., U S
WEST, Inc. is obligated to purchase the shares pursuant to the tender
offer unless certain circumstances occur, including the termination of
the merger agreement between Frontier Corporation and Global Crossing
Ltd. as a result of the Qwest proposed transactions or otherwise.
In addition, under the Merger Agreement between U S WEST, Inc. and
Global Crossing Ltd., U S WEST, Inc. is entitled under certain
circumstances to consider a Superior Proposal, Pursuant to the Merger
Agreement, a "Superior Proposal" is defined as a proposal which the Board
of Directors of U S WEST, Inc. determines in its good-faith judgment,
based on, among other matters, the advice of a nationally recognized
financial advisor, to be more favorable to its stockholders than the
transaction between the U S WEST, Inc. and Global Crossing Ltd., taking
into account all relevant factors. U S WEST, Inc. has not, at this time,
made a determination that the Qwest proposal constitutes a Superior
Proposal as defined in the Merger Agreement. If the Board of Directors of
U S WEST, Inc. were to determine that Qwest's proposal constituted a
Superior Proposal for the stockholders of U S WEST, Inc. , U S WEST, Inc.
would have the right to terminate the Merger Agreement subject to the
payment of a break-up fee of $850 million of which $250 million can be
applied against the purchase of services from Global Crossing Ltd. No
determination has been made as of this time by the Board of Directors of
U S WEST, Inc.
In addition, the waiting period under the HSR Act relating to the
tender offer expired without any request by the Antitrust Division or the
FTC for additional information.
[Further background to come.]
On June 21, 1999, Qwest filed a Registration Statement on Form S-4, of
which this joint proxy statement/prospectus is a part, with the Commission.
Our Reasons for the Mergers
[To come.]
Recommendations of Our Boards of Directors
[To come.]
Accounting Treatment
The mergers will each be accounted for by Qwest as a purchase of a
business. Under this method of accounting, the assets and liabilities of U S
WEST and Frontier will be recorded at their fair value, and any excess of
Qwest's purchase price over such fair value will be accounted for as goodwill.
The revenues and expenses of U S WEST and Frontier will be included in Qwest's
consolidated financial statements from the date of consummation of the
applicable merger.
I-15
<PAGE>
Chapter One - The Merger
Material Federal Income Tax Consequences of the Mergers
The following discussion summarizes the opinions, to be delivered at the
closing of the U S WEST merger, of counsel to Qwest and U S WEST, and the
opinions, to be delivered at the closing of the Frontier merger, of counsel to
Qwest and Frontier as to the material United States federal income tax
consequences of the U S WEST merger and the Frontier merger, respectively.
This discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations, administrative interpretations and
court decisions as in effect as of the date of this joint proxy
statement/prospectus, all of which are subject to change, possibly with
retroactive effect.
This discussion does not address all aspects of federal income taxation
that may be relevant to a shareholder of U S WEST or Frontier in light of that
shareholder's particular circumstances or to a shareholder subject to special
rules, such as:
o a shareholder who is not a citizen or resident of the United States,
o a financial institution or insurance company,
o a tax-exempt organization,
o a dealer or broker in securities,
o a shareholder that holds its U S WEST common stock or Frontier common
stock as part of a hedge, appreciated financial position, straddle or
conversion transaction, or
o a shareholder who acquired his U S WEST common stock or Frontier
common stock pursuant to the exercise of options or otherwise as
compensation.
Tax Opinions. It is a condition to the obligations of Qwest and U S WEST
to complete the U S WEST merger, and a separate condition to the obligations
of Qwest and Frontier to complete the Frontier merger, that each receive an
opinion from its counsel, dated as of the closing date of the relevant merger,
that the U S WEST merger or the Frontier merger, respectively, will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and that each of Qwest and, in the case of the U S
WEST merger, U S WEST and U S WEST merger sub, or, in the case of the Frontier
merger, Frontier and Frontier merger sub, will be a party to the
reorganization within the meaning of Section 368(b) of the Code. Qwest does
not currently intend to waive these conditions.
In rendering these opinions, counsel will rely on representations and
covenants made by Qwest, U S WEST, Frontier and/or others, including those
contained in certificates of officers of Qwest and of U S WEST or Frontier, as
the case may be. These opinions will also rely on assumptions, including
assumptions regarding the absence of changes in existing facts and the
completion of the U S WEST merger or the Frontier merger, as the case may be,
in the manner contemplated by the U S WEST merger agreement or the Frontier
merger agreement, respectively. If any of those representations, covenants or
assumptions is inaccurate, counsel may not be able to render the required
opinions and/or the tax consequences of the mergers could differ from those
discussed here. Opinions of counsel neither bind the IRS nor preclude the IRS
from adopting a contrary position. Qwest does not intend to obtain a ruling
from the IRS on the tax consequences of the mergers.
Tax Consequences of the U S WEST Merger. For federal income tax purposes:
o A holder of U S WEST common stock will not recognize any gain or
loss upon its exchange of its shares of U S WEST common stock for
shares of Qwest common stock in the U S WEST merger, except with
respect to cash received instead of a fractional share of Qwest
common stock.
o To the extent that a holder of U S WEST common stock receives cash
instead of a fractional share of Qwest common stock, the holder
will be required to recognize gain or loss, measured by the
difference between the amount of cash received and the portion of
the tax basis of that holder's shares of U S WEST common stock
allocable to that fractional share of Qwest common stock. This gain
or loss will be capital gain or loss and will be long-term capital
gain or loss if the share of U S WEST common
I-16
<PAGE>
Chapter One - The Merger
stock exchanged for the fractional share of Qwest common stock was
held for more than one year at the effective time of the U S WEST
merger.
o A holder of U S WEST common stock will have a tax basis in the
Qwest common stock received in the U S WEST merger equal to (1) the
tax basis of the U S WEST common stock surrendered by that holder
in the U S WEST merger, less (2) any tax basis of the U S WEST
common stock surrendered that is allocable to a fractional share of
Qwest common stock for which cash is received.
o The holding period for shares of Qwest common stock received in
exchange for shares of U S WEST common stock in the U S WEST merger
will include the holding period for the shares of U S WEST common
stock surrendered in the U S WEST merger.
Tax Consequences of the Frontier Merger. For federal income tax purposes:
o A holder of Frontier common stock will not recognize any gain or
loss upon its exchange of its shares of Frontier common stock for
shares of Qwest common stock in the Frontier merger, except (1)
that the holder will be taxed on any gain on the shares of Frontier
common stock surrendered in the Frontier merger to the extent of
cash (other than cash received instead of a fractional share of
Qwest common stock) received, and (2) with respect to cash received
instead of a fractional share of Qwest common stock.
o To the extent that a holder of Frontier common stock receives cash
instead of a fractional share of Qwest common stock, the holder
will be required to recognize gain or loss, measured by the
difference between the amount of cash received and the portion of
the tax basis of that holder's shares of Frontier common stock
allocable to that fractional share of Qwest common stock. This gain
or loss will be capital gain or loss and will be long-term capital
gain or loss if the share of Frontier common stock exchanged for
the fractional share of Qwest common stock was held for more than
one year at the effective time of the Frontier merger.
o A holder of Frontier common stock will have a tax basis in the
Qwest common stock received in the Frontier merger equal to (1) the
tax basis of the Frontier common stock surrendered by that holder
in the Frontier merger, plus (2) any gain that is recognized by
that holder as a result of the receipt of cash (other than cash
received instead of a fractional share of Qwest common stock) in
the Frontier merger, less (3) any tax basis of the Frontier common
stock surrendered that is allocable to a fractional share of Qwest
common stock for which cash is received, less (4) the cash (other
than cash received instead of a fractional share of Qwest common
stock) received by that holder in the Frontier merger.
o The holding period for shares of Qwest common stock received in
exchange for shares of Frontier common stock in the Frontier merger
will include the holding period for the shares of Frontier common
stock surrendered in the Frontier merger.
This discussion of material federal income tax consequences is intended
to provide only a general summary, and is not a complete analysis or
description of all potential federal income tax consequences of the mergers.
This discussion does not address tax consequences that may vary with, or are
contingent on, individual circumstances. In addition, it does not address any
non-income tax or any foreign, state or local tax consequences of the mergers.
Accordingly, we urge each shareholder of U S WEST and Frontier to consult his
tax advisor to determine the particular United States federal, state or local
or foreign income or other tax consequences to that shareholder of the U S
WEST merger or the Frontier merger.
I-17
<PAGE>
Chapter One - The Merger
Regulatory Matters Relating to the U S WEST Merger
Antitrust Review
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
rules promulgated under the HSR Act, the U S WEST merger may not be
consummated until notifications have been given and certain information and
materials have been furnished to and reviewed by the Department of Justice and
the Federal Trade Commission and specified waiting period requirements have
been satisfied. As of this date Qwest has not taken any actions in connection
with this requirement. In addition, at any time prior to or after the
consummation of the U S WEST merger, the DOJ or the FTC could take action
under the federal antitrust laws as it deems necessary in the public interest,
including seeking to enjoin the U S WEST merger or seeking conditions thereon.
State antitrust authorities and private parties in certain circumstances may
bring legal action under the antitrust laws seeking to enjoin the U S WEST
merger or seeking conditions.
Any transaction involving a substantial change in control of U S WEST can
be expected to draw particular scrutiny due to controversies regarding U S
WEST's implementation of those provisions of the Telecommunications Act of
1996 (the "Telecommunications Act") that require U S WEST to take steps to
open its local exchange market to competition. Attention also is likely to
focus on steps that Qwest and U S WEST would take to comply with restrictions
on the provision of interLATA long distance services within the 14 state U S
WEST region. Those restrictions currently apply to U S WEST and would also
apply to Qwest following the U S WEST merger in each U S WEST region state
pending FCC approval of future applications demonstrating that in the
particular state the requirements of Section 271 of the Telecommunications Act
with respect to local exchange competition have been met. Qwest does not
expect that the FCC will have granted such approval in any U S WEST state by
the time that the U S WEST merger otherwise would close. As a result, prior to
closing Qwest will take all action necessary to ensure that at closing the
combined company will not violate the Telecommunications Act, including,
without limitation, the divestiture or termination of interLATA services Qwest
currently provides in the U S WEST region. Notwithstanding the foregoing,
there can be no assurance that a challenge to the U S WEST merger on antitrust
grounds will not be made or, if a challenge is made, what the outcome of the
challenge will be.
FCC Approval
Because the U S WEST merger will result in the transfer of control of U S
WEST for purposes of the Communications Act of 1934, as amended (the
"Communications Act"), the prior approval of the FCC is necessary before the U
S WEST merger may be consummated. In reviewing an application for its approval
to the transfer of control, the FCC considers whether such transfers will
serve the public interest, convenience and necessity, including whether the
proposed transferee has the requisite qualifications to operate the licensed
entities. Third parties also have an opportunity to file petitions requesting
the FCC to deny transfer of control applications, or to file comments on such
applications requesting conditions on approval of such applications. Upon
grant of FCC approval, the transaction may be consummated by the parties.
However, for a period after issuance of that approval the FCC action remains
subject to judicial review upon the appeal of a third party, or subject to
reconsideration by the FCC itself. Parties who close transactions during this
period assume the risk that the FCC's approval could be reversed or modified
by the FCC or a reviewing court.
Qwest has not yet filed an application for consent to the transfer of
control of U S WEST. As noted above, substantial controversy exists with
respect to U S WEST's implementation of those provisions of the
Telecommunications Act that require U S WEST to take steps to open its local
exchange market to competition. Third parties have asked the FCC to condition
mergers involving other Regional Bell Holding Companies ("RBOCs") on further
actions to expand local exchange competition. Although the U S WEST merger
does not involve one RBOC taking control of another, it is possible that third
parties nevertheless will request conditions on the FCC's approval of the
transfer of control of U S WEST to Qwest. Approval of the merger also could be
delayed by issues related to the current restrictions on the provision of
interLATA long distance services within the U S WEST region. As discussed
above, Qwest expects to take actions to comply with those restrictions as of
the
I-18
<PAGE>
Chapter One - The Merger
closing of the U S WEST merger, including, without limitation, the divestiture
or termination of its interLATA services in the U S WEST region, pending FCC
approval at a later date after closing of applications demonstrating that the
requirements of Section 271 of the Telecommunications Act with respect to
local exchange competition have been met. Nevertheless, there can be no
assurance that the Commission will grant its approval to the transfer of
control of U S WEST on a timely basis, or without adverse conditions in this
case.
State Approvals
Certain state public utility commissions also have jurisdiction to
approve the transfer of control of U S WEST's intrastate local exchange
telephone and long distance operations to Qwest. Qwest will file applications
for consent to the transfer of control of such operations in each state where
such an application is required. Third parties generally have an opportunity
to comment on such applications and in some cases the PUCs may request
additional information or hold hearings. Qwest is aware of controversies in
certain states regarding matters involving U S WEST rates and service quality.
In addition, state PUC proceedings involving transfers of control of other
RBOCs have sometimes been slowed by third party or Commission interest in
conditioning such transfers on commitments by the RBOC to take certain actions
regarding its regulated services, or regarding its implementation of the
requirements of the Telecommunications Act related to opening the local
exchange market to competition. There can be no assurance that the PUC
approval process will be resolved on a timely basis or without material
conditions.
Other Regulatory Approvals
Qwest is not presently aware of other regulatory approvals that would be
required in connection with this matter. However, once it has had an
opportunity to conduct further discussions with U S WEST, it is possible that
it will learn of other approval requirements, including potential approval
requirements related to Qwest's operations in other countries. There can be no
assurance that those additionally required approvals, if any, will be obtained
on a timely basis, or without condition.
Regulatory Matters Relating to the Frontier Merger
Antitrust Review
Under the HSR Act and the rules promulgated under the HSR Act, the
Frontier merger may not be consummated until notifications have been given and
certain information and materials have been furnished to and reviewed by the
DOJ and the FTC and specified waiting period requirements have been satisfied.
As of this date Qwest has not taken any actions in connection with this
requirement. In addition, at any time prior to or after the consummation of
the Frontier merger, the DOJ or the FTC could take action under the federal
antitrust laws as it deems necessary in the public interest, including seeking
to enjoin the Frontier merger or seeking conditions thereon. State antitrust
authorities and private parties in certain circumstances may bring legal
action under the antitrust laws seeking to enjoin the Frontier merger or
seeking conditions. There can be no assurance that a challenge to the Frontier
merger on antitrust grounds will not be made or, if a challenge is made, what
the outcome of the challenge will be.
FCC Approval
Because the Frontier merger will result in the transfer of control of
Frontier for purposes of the Communications Act, the prior approval of the FCC
is necessary before the Frontier merger may be consummated. In reviewing an
application for its approval to a transfer of control, the FCC considers
whether the transfer will serve the public interest, convenience and
necessity, including whether the proposed transferee has the requisite
qualifications to operate the licensed entities. Third parties also have an
opportunity to file petitions requesting the FCC to deny transfer of control
applications, or to file comments on such applications requesting conditions
on approval of such applications. Qwest and Frontier are subject to reduced
FCC regulation, and applications for
I-19
<PAGE>
Chapter One - The Merger
consent to the transfer of control of a carrier in these circumstances
generally are processed more rapidly, and are less likely to result in
conditions. Upon grant of FCC approval, the transaction may be consummated by
the parties. However, for a period after issuance of that approval the FCC
action remains subject to judicial review upon the appeal of a third party, or
subject to reconsideration by the FCC itself. Parties who close transactions
during this period assume the risk that the FCC's approval could be reversed
or modified by the FCC or a reviewing court.
Qwest has not yet filed an application for consent to the transfer of
control of Frontier, and there can be no assurance that the Commission will
grant its approval on a timely basis, or without adverse conditions in this
case.
State Approvals
Certain state public utility commissions also have jurisdiction to
approve the transfer of control to Qwest of Frontier's intrastate local
exchange telephone and long distance operations in their respective states.
Qwest will file applications for consent to the transfer of control of such
operations in each state where such an application is required. Third parties
generally have an opportunity to comment on such applications and in some
cases the PUCs may request additional information or hold hearings. Qwest
anticipates that greater PUC review is likely in those states where Frontier
has significant operations as the incumbent local exchange telephone company,
including New York and Iowa. Ordinarily PUC review is reduced where approvals
are requested for the transfer of control of competitive local exchange
operations or intrastate long operations. However, there can be no assurance
that the PUC approval process will move rapidly or be resolved on a timely
basis.
Other Regulatory Approvals
Qwest is not presently aware of other regulatory approvals that would be
required in connection with this matter. However, once it has had an
opportunity to conduct discussions with Frontier, it is possible that it will
learn of other approval requirements, including potential approval
requirements related to Qwest's operations in the United Kingdom and Canada.
There can be no assurance that those additionally required approvals, if any,
will be obtained on a timely basis, or without condition.
Appraisal Rights
Holders of Qwest common stock do not have dissenters' appraisal rights
under Delaware law in connection with the mergers since Qwest is not a
constituent corporation in either of the mergers. Holders of U S WEST common
stock do not have dissenters' appraisal rights under Delaware law in
connection with the U S WEST merger because the shares of Qwest common stock
that such holders will be entitled to receive in the U S WEST merger will be
listed on the NASDAQ at the closing of the U S WEST merger. Holders of
Frontier common stock do not have dissenters' appraisal rights under New York
law in connection with the Frontier merger because Frontier common stock will
be listed on the New York Stock Exchange at the closing of the Frontier
merger.
Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
This joint proxy statement/prospectus does not cover any resales of the
Qwest common stock to be received by the shareholders of U S WEST and Frontier
upon completion of the mergers, and no person is authorized to make any use of
this joint proxy statement/prospectus in connection with any such resale.
All shares of Qwest common stock received by U S WEST and Frontier
shareholders in the mergers will be freely transferable, except that shares of
Qwest common stock received by persons who are deemed to be "affiliates" of U
S WEST or Frontier under the Securities Act of 1933, as amended, at the time
of the U S WEST or Frontier meeting, as the case may be, may be resold by them
only in transactions permitted by Rule 145 under the 1933 Act or as otherwise
permitted under the 1933 Act. Persons who may be deemed to be affiliates of U
S WEST or Frontier for such purposes generally include individuals or entities
that control, are controlled by or are under common control with U S WEST or
Frontier, as the case may be, and include directors and executive officers of
I-20
<PAGE>
Chapter One - The Merger
U S WEST and Frontier. The merger agreements require that U S WEST and
Frontier use all reasonable efforts to cause each of such affiliates to
execute a written agreement to the effect that such persons will not offer,
sell or otherwise dispose of any of the shares of Qwest common stock issued to
them in the U S WEST or Frontier merger, as the case may be, in violation of
the 1933 Act or the related SEC rules.
I-21
<PAGE>
Chapter One - The Merger
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Qwest common stock is listed on the NASDAQ and U S WEST common stock and
Frontier common stock are each listed on the NYSE. Qwest's ticker symbol on
the NASDAQ is "QWST" and U S WEST and Frontier's ticker symbols on the NYSE
are "USW" and "FRO", respectively. The following table shows, for the calendar
quarters indicated, based on published financial sources (1) the high and low
last reported closing prices per share of Qwest common stock as reported on
the NASDAQ Composite Tape, (2) the high and low last reported closing prices
per share of U S WEST and Frontier common stock as reported on the New York
Stock Exchange Composite Transaction Tape and (3) the cash dividends per share
of each of Qwest, U S WEST and Frontier common stock.
<TABLE>
<CAPTION>
Qwest Common Stock(1) U S WEST Common Stock Frontier Common Stock
--------------------------------- -------------------------------- ---------------------------------
High Low Dividend High Low Dividend High Low Dividend
------- ------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997
First Quarter. $ n/a $ n/a $ n/a $37.000 $31.875 $0.535 $23.000 $17.875 $0.218
Second Quarter 7.375 6.813 38.250 31.375 0.535 20.250 15.375 0.218
Third Quarter. 12.750 6.813 39.250 35.813 0.535 24.125 19.250 0.218
Fourth Quarter 16.438 11.875 46.688 38.250 0.535 25.000 21.063 0.218
1998
First Quarter. $20.219 $15.094 $56.313 $45.375 $0.535 $33.438 $24.438 $0.223
Second Quarter 19.781 13.938 57.438 46.813 0.535 33.000 28.313 0.223
Third Quarter. 23.000 12.500 54.938 48.438 0.535 36.750 24.125 0.223
Fourth Quarter 25.031 14.469 65.000 51.875 0.535 34.125 24.813 0.223
1999
First Quarter. $37.406 $25.625 $65.625 $53.313 $0.535 $54.938 $33.188 $0.223
Second Quarter
(through
June 17).... 48.063 34.125 0.000 62.250 51.563 0.535 58.875 49.125 0.050
</TABLE>
- -------------------
(1) Qwest prior period share prices and dividends restated for (i) a
two-for-one stock split effective February 25, 1998 and (ii) a second
two-for-one stock split effective May 24, 1999.
On June 11, 1999, the last full trading day before Qwest publicly
announced its merger proposals to U S WEST and Frontier, the last reported
closing prices per share of Qwest, U S WEST and Frontier stock were $44.875,
$54.875 and $55.4375, respectively. On June 18, 1999, the most recent
practicable date prior to the filing of this joint proxy statement/prospectus,
the last reported closing prices per share of Qwest, U S WEST and Frontier
stock were $37.9375, $58.0 and $58.3125, respectively. Stockholders are urged
to obtain current market quotations prior to making any decision with respect
to the mergers.
The merger agreements do not permit Qwest, U S WEST and Frontier to
change their dividend policies before the mergers. The payment of dividends by
the combined company after the mergers, however, will depend on business
conditions, the combined company's financial condition and earnings, and other
factors.
I-22
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months
Years Ended December 31, Ended March 31,
-------------------------------------------------- ------------------
(in millions (except per share information))
1994 1995 1996 1997 1998(1) 1998 1999
------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Total revenue........................... $71 $125 $231 $697 $2,243 $177 $878
Total operating expense................. 82 161 243 673 2,996 181 818
Earning (loss) from operations.......... (11) (36) (12) 24 (754) (4) 60
Earning (loss) before income taxes...... (11) (39) (10) 24 (850) (10) 25
Net earnings (loss)..................... (7) (25) (7) 15 (844) (7) 5
Net earnings (loss) per share - basic... (0.02) (0.08) (0.02) 0.04 (1.51) (0.02) 0.01
Net earnings (loss) per share - diluted. (0.02) (0.08) (0.02) 0.04 (1.51) (0.02) 0.01
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of March 31,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Balance Sheet Data:
Total assets..................... $90 $184 $263 $1,398 $ 68 $1,780 $8,009
Long-term debt................... 27 69 109 631 2,307 1,029 2,320
Total stockholders' equity(2).... 25 27 9 382 4,238 407 4,401
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended
Years Ended December 31, March 31,
------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Financial Data:
EBITDA(3)................................. $ (6) $(26) $ 7 $ 44 $ 295 $ 5 $ 156
Net cash provided by (used in) operating
activities............................... 3 (57) 33 (36) 45 54 (80)
Net cash used in investing activities..... (42) (59) (53) (357) (1,439) (142) (315)
Net cash provided by financing activities 34 114 26 766 1,477 282 51
Capital expenditures...................... 41 49 57 346 1,413 142 300
</TABLE>
- -------------------
(1) The selected financial and operating data for the year ended as of
December 31, 1998 include the effect of the acquisitions of LCI
International, Inc., Icon CMT Corp., EUnet International Limited and
Phoenix Network, Inc., which occurred during 1998. (See further
discussion of these acquisitions in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contained in the 1998
Qwest Form 10-K.)
(2) Qwest has not paid cash dividends on its Common Stock since becoming a
public company in June 1997 and does not anticipate paying cash dividends
in the foreseeable future.
(3) EBITDA represents net earnings (loss) before interest, income tax expense
(benefit), depreciation and amortization, a non-recurring expense of $2.6
million in the year ended December 31, 1996, the non-recurring
I-23
<PAGE>
Chapter One - The Merger
gain on sale of telecommunication agreements of $6.1 million in the year
ended December 31, 1996, to restructure operations, a non-recurring gain
on sale of contract rights of approximately $9.3 million in the year
ended December 31, 1997, and non-recurring merger-related expenses of
$846.5 million in the year ended December 31, 1998. EBITDA does not
represent cash flow for the periods presented and should not be
considered as an alternative to net earnings (loss) as an indicator of
Qwest's operating performance or as an alternative to cash flows as a
source of liquidity, and may not be comparable with EBITDA as defined by
other companies.
I-24
<PAGE>
Chapter One - The Merger
U S WEST, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
-------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(in millions (except per share amounts))
Operating revenues....................... $10,132 $10,508 $ 11,168 $ 11,479 $ 12,378 $ 3,009 $ 3,182
Operating expenses....................... 7,616 7,931 8,356 8,703 9,329 2,194 2,389
Operating income......................... 2,516 2,577 2,812 2,776 3,049 815 793
Income before extraordinary item and
cumulative effect of change in
accounting principle(1)................. 1,403 1,431 1,501 1,527 1,508 434 397
Net income(2)............................ 1,403 1,423 1,535 1,524 1,508 434 397
Pro forma income(3) * * 1,339 1,365 1,436 393 --
Historical earnings per share:(1,2,4)
Basic................................... 3.09 3.02 3.21 3.16 3.05 0.89 0.79
Diluted................................. 3.03 2.98 3.17 3.12 3.02 0.89 0.78
Average common shares outstanding
(thousands):
Basic................................... 453,316 470,716 477,549 482,751 494,395 484,964 503,306
Diluted................................. 463,801 481,933 488,591 491,232 498,798 489,113 508,121
Pro forma earnings per share(3)
Basic................................... * * * * $ 2.86 $ 0.78 --
Diluted................................. * * * * 2.84 0.78 --
Pro forma average common shares
outstanding (thousands):
Basic................................... * * * * 501,827 501,305 --
Diluted................................. * * * * 506,230 505,454 --
Dividends per common share............... $ 2.14 2.14 $ 2.14 $ 2.14 $ 2.14 $ 0.54 $ 0.54
Total assets............................. 16,317 16,960 17,279 17,667 18,407 18,407 18,709
Total debt(5)............................ 6,147 6,782 6,545 5,715 9,919 5,511 10,035
Debt to total capital ratio.............. 64.7% 65.0% 61.6% 56.7% 92.9% 92.9% 91.6%
Capital expenditures..................... $ 2,513 2,770 $ 2,831 $ 2,672 $ 2,905 $ 522 $ 787
Telephone network access lines in
service (thousands)...................... 14,299 14,795 15,424 16,033 16,601 * *
Billed access minutes of use (millions): * *
Interstate.............................. 43,768 47,801 52,039 55,362 58,927 * *
Intrastate.............................. 8,507 9,504 10,451 11,729 12,366 * *
Total employees.......................... 55,246 54,552 51,477 51,110 54,483 * *
Telephone company employees.............. 47,493 47,934 45,427 43,749 46,310 * *
Telephone company employees per
10,000 access lines...................... 33.2 32.4 29.5 27.3 27.9 * *
- -------------------
(1) 1998 income includes separation expenses of $68 ($0.13 per diluted share) associated with the Separation of Old U S
WEST into two independent companies and an asset impairment charge of $21 ($0.04 per diluted share). 1997 income
includes a $152 regulatory charge ($0.31 per diluted share) related primarily to the 1997 Washington State Supreme Court
ruling that upheld a Washington rate order, a gain of $32 ($0.07 per diluted share) on the sale of an interest in Bell
Communications Research, Inc. and a gain of $48 ($0.10 per diluted share) on the sales of local telephone exchanges. 1996
income includes a gain of $36 ($0.07 per diluted share) on the sales of local telephone exchanges and the current effect of
$15 ($0.03 per diluted share) from adopting Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." 1995 income includes a gain of
$85 ($0.18 per diluted share) on the sales of local telephone exchanges and costs of $8 ($0.02 per diluted share) associated
</TABLE>
I-25
<PAGE>
Chapter One - The Merger
with the 1995 Recapitalization discussed in footnote 4 below. 1994
income includes a gain of $51 ($0.11 per diluted share) on the sales of
local telephone exchanges.
(2) 1997 net income was reduced by an extraordinary charge of $3 ($0.01per
diluted share) for the early extinguishment of debt. 1996 net income
includes a gain of $34 ($0.07 per diluted share) for the cumulative
effect of the adoption of FAS No. 121. 1995 net income was reduced by an
extraordinary item of $8 ($0.02per diluted share) for the early
extinguishment of debt.
(3) Pro forma income reflects the incremental interest expense associated
with the Dex Indebtedness from the beginning of the period through the
Separation Date. The pro forma earnings per diluted share amounts also
reflect the issuance of approximately 16,341,000 shares of common stock
(net of the redemption of approximately 305,000 fractional shares) issued
in connection with the Dex Alignment as if the shares had been issued at
the beginning of the period indicated.
(4) The historical average shares outstanding assume a one-for-one conversion
of historical Communications Group common shares outstanding into shares
of U S WEST as of the Separation Date. The 1998 historical average common
shares outstanding include the issuance of approximately 16,341,000
shares of common stock (net of redemption of approximately 305,000
fractional shares) issued in connection with the Dex Alignment. Effective
November 1, 1995, each share of common stock of Old U S WEST was
converted into one share each of Communications Stock and Media Stock
(the "1995 Recapitalization"). Earnings per common share and dividends
per common share for 1995 and 1994 have been presented on a pro forma
basis to reflect the two classes of stock as if they had been outstanding
since January 1, 1994.
(5) 1998 debt includes $3,900 of Dex Indebtedness.
* Information has not been presented or is not available.
I-26
<PAGE>
Chapter One - The Merger
FRONTIER CORPORATION
SELECTED FINANCIAL DATA
I-27
<PAGE>
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------------------------------------- ------------------
(in millions (except per share amounts))
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ 1,668 2,150 2,589 2,375 2,594 632 675
Income from Continuing Operations
(before Extraordinary Items and
Cumulative Effect of Changes in
Accounting Principles)............. 187 145 198 32 178 34 40
Consolidated Net Income............. 180 22 190 32 176 34 40
Basic Earnings per Common Share:
Income before Extraordinary Items
and Cumulative effect of Changes in
Accounting Principles.............. 1.25 0.94 1.19 0.18 1.03 0.20 0.23
Extraordinary items................. -- (0.79) -- -- -- -- --
Cumulative Effect of Changes in
Accounting Principles.............. (0.04) (0.01) (0.05) -- (0.01) -- --
Basic Earnings per Common Share..... 1.21 0.14 1.14 0.18 1.02 0.20 0.23
Diluted Earnings per Common Share:
Income before Extraordinary Items
and Cumulative effect of Changes in
Accounting Principles.............. 1.15 0.88 1.18 0.18 1.02 0.20 0.23
Extraordinary items................. -- (0.74) -- -- -- -- --
Cumulative Effect of Changes in
Accounting Principles.............. (0.04) (0.01) (0.05) -- (0.01) -- --
Diluted Earnings per Common Share... 1.11 0.13 1.13 0.18 1.01 0.20 0.23
Cash Dividends Declared per Common
Share............................... 0.815 0.835 0.855 0.875 0.890 -- --
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of March 31,
------------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets.......................... $ 2,061 $2,111 $2,229 $ 2,488 $ 3,059 $2,597 $3,249
Long-Term Debt........................ 662 619 678 935 1,351 986 1,464
</TABLE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
COMPARATIVE PER SHARE DATA
(Unaudited)
<TABLE>
At December At March 31,
31, 1998 1999
----------- -----------
<S> <C> <C>
Book value per share
Qwest historical $ 6.11 $ 6.27
U S WEST historical $ 1.50 $ 1.83
Frontier historical $ 5.94 $ 6.20
Qwest/U S WEST and Frontier pro forma combined $ 26.25 $ 26.23
Qwest/U S WEST pro forma combined $ 24.29 $ 24.28
Qwest/Frontier pro forma combined $ 13.61 $ 13.68
U S WEST pro forma equivalent for U S WEST and Frontier offer (a) $ 46.80 $ 46.77
U S WEST pro forma equivalent for U S WEST offer (b) $ 42.22 $ 42.20
Frontier pro forma equivalent for U S WEST and Frontier offer (c) $ 32.18 $ 32.16
Frontier pro forma equivalent for Frontier offer (d) $ 16.07 $ 16.16
</TABLE>
<TABLE>
<CAPTION>
For the Year For the three
Ended Months
December Ended March
31, 1998 31, 1999
------------ -------------
<S> <C> <C>
Net earnings (loss) per share
Qwest historical - basic and diluted $ (1.51) $ 0.01
U S WEST historical - basic $ 3.05 $ 0.79
U S WEST historical - diluted $ 3.02 $ 0.78
Frontier historical - basic $ 1.02 $ 0.23
Frontier historical - diluted $ 1.01 $ 0.23
Qwest/U S WEST and Frontier pro forma combined - basic and diluted $ (0.29) $ 0.06
Qwest/U S WEST pro forma combined - basic and diluted $ (0.13) $ 0.12
Qwest/Frontier pro forma combined - basic and diluted $ (1.46) $(0.07)
U S WEST pro forma equivalent for U S WEST and
Frontier offer - basic and diluted (a) $ (0.52) $ 0.11
U S WEST pro forma equivalent for U S WEST offer -
basic and diluted (b) $ (0.23) $ 0.21
Frontier pro forma equivalent for U S WEST and
Frontier offer - basic and diluted (c) $ (0.36) $ 0.07
Frontier pro forma equivalent for Frontier offer - basic and diluted (d) $ (1.72) $(0.08)
</TABLE>
- -------------------
(a) The U S WEST pro forma equivalent represents the Qwest/U S WEST and
Frontier combined book value or net income (loss) per share multiplied by
a Qwest exchange ratio of 1.783.
(b) The U S WEST pro forma equivalent represents the Qwest/U S WEST book
value or net income (loss) per share multiplied by a Qwest exchange ratio
of 1.738.
(c) The Frontier pro forma equivalent represents the Qwest/U S WEST and
Frontier combined book value or net income (loss) per share multiplied by
a Qwest exchange ratio of 1.226.
(d) The Frontier pro forma equivalent represents the Qwest/Frontier book
value or net income (loss) per share multiplied by a Qwest exchange ratio
of 1.181.
I-28
<PAGE>
Chapter One - The Merger
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information of Qwest
presented below is derived from the historical financial statements of Qwest,
U S WEST and Frontier. The unaudited pro forma condensed combined financial
information is presented under three separate merger scenarios: (1) a merger
between Qwest and U S WEST; (2) a merger between Qwest and Frontier; or (3) a
merger between Qwest, U S WEST and Frontier. The mergers with Frontier and U S
WEST are not dependent upon each other. Under all scenarios, the unaudited pro
forma condensed combined financial information was prepared using the purchase
method of accounting, with Qwest treated as the acquirer, as if the merger(s)
had been completed on January 1, 1998 for statement of operations purposes and
on March 31, 1999 for balance sheet purposes.
For a summary of the U S WEST merger agreement, see "The U S WEST Merger
Agreement". For a summary of the Frontier merger agreement, see "The Frontier
Merger Agreement".
The unaudited pro forma condensed combined financial information is based upon
the assumptions and adjustments described in the accompanying notes to the
unaudited pro forma condensed combined financial information presented on the
following pages. The assumptions and related pro forma adjustments have been
developed from information available to Qwest from the December 31, 1998 Form
10-K filings and March 31, 1999 Form 10-Q filings of Frontier and U S WEST.
Such pro forma adjustments have been included only to the extent known and
reasonably available to Qwest. Additional information may exist that could
materially affect the assumptions and pro forma adjustments. Such information
is not available to Qwest because it is within the peculiar knowledge of
Frontier and U S WEST. Furthermore, the determination of the fair value of
Qwest common stock to be issued has been estimated based upon the closing
market price of $37.94 on June 18, 1999. The final purchase consideration will
be based partly upon the average market price of the Qwest common stock for a
reasonable period of time before and after agreement is reached on the mergers
among Qwest, Frontier and U S WEST. As a result of these uncertainties, the
final determination and allocation of purchase price may differ from the
amounts assumed in this unaudited pro forma condensed combined financial
information and those differences may be material.
This unaudited pro forma condensed combined financial information should be
read in conjunction with the separate historical financial statements and
accompanying notes of Qwest, U S WEST and Frontier that are incorporated by
reference in this joint proxy statement/prospectus. You should not rely on the
unaudited pro forma condensed combined financial information as an indication
of the results of operations or financial position that would have been
achieved if the merger(s) had taken place earlier or of the results of
operations or financial position of Qwest after the completion of such
transactions.
I-29
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
QWEST AND U S WEST COMBINED
Three Months Ended March 31, 1999
(Unaudited)
(Amounts in Millions, Except Per Share Information)
<TABLE>
<CAPTION>
Historical
------------------------------ Pro Forma Pro Forma
Qwest(1) U S WEST(1) Adjustments Combined
------------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Communications services................. $ 737 $ 3,182 $ $3,919
Construction services................... 141 -- 141
------ ------- --------- ------
878 3,182 -- 4,060
Operating expenses:
Operating expenses...................... 722 1,787 2,509
Depreciation and amortization........... 96 602 212 (4) 910
------ ------- --------- ------
818 2,389 212 3,419
------ ------- --------- ------
Earnings (loss) from operations............... 60 793 (212) 641
------ ------- --------- ------
Other expense (income):
Interest expense, net................... 32 153 185
Other net............................... 3 1 4
------ ------- --------- ------
Earnings (loss) before income taxes........... 25 639 (212) 452
Income tax expense (benefit).................. 20 242 (5) 262
------ ------- --------- ------
Net earnings (loss)........................... $ 5 $ 397 $ (212) $ 190
Net earnings per share - basic................ $ 0.01 $ 0.12
====== ======= ========= ======
(6)
Net earnings per share - diluted.............. $ 0.01 $ 0.12
====== ======= ========= ======
(6)
Weighted average shares outstanding - basic... 698 1,574
====== ======= ========= ======
Weighted average shares outstanding - diluted. 737 1,621
====== ======= ========= ======
</TABLE>
I-30
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
QWEST AND U S WEST COMBINED
Year Ended December 31, 1998
(Unaudited)
(Amounts in Millions, Except Per Share Information)
<TABLE>
<CAPTION>
Historical
------------------------------ Pro Forma Pro Forma
Qwest(1) U S WEST(1) Adjustments Combined
------------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Communications services.................. $1,554 $12,378 $ $13,932
Construction services.................... 688 -- 688
------ ------- ------- -------
2,242 12,378 -- 14,620
------ ------- ------- -------
Operating expenses:
Operating expenses....................... 1,948 7,130 9,078
Depreciation and amortization............ 202 2,199 847 (4) 3,248
Merger costs............................. 86 -- 86
Provision for in-process R&D............. 760 -- 760
2,996 9,329 847 13,172
------ ------- ------- -------
Earnings (loss) from operations............... (754) 3,049 (847) 1,448
------ ------- ------- -------
Other expense (income):
Interest expense, net.................... 97 543 640
Other net................................ (1) 87 86
------ ------- ------- -------
Earnings (loss) before income taxes........... (850) 2,419 (847) 722
Income tax expense (benefit).................. (6) 911 (5) 905
------ ------- ------- -------
Net earnings (loss)........................... $ (844) $ 1,508 $ (847) $ (183)
====== =======
Net loss per share - basic.................... $(1.51) (6) $ (0.13)
====== =======
Net loss per share - diluted.................. $(1.51) (6) $ (0.13)
====== =======
Weighted average shares outstanding - basic... 558 1,434
====== ======
Weighted average shares outstanding - diluted. 558 1,434
====== ======
</TABLE>
I-31
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
QWEST AND U S WEST COMBINED
March 31, 1999
(Unaudited)
(Amounts in Millions)
<TABLE>
<CAPTION>
Historical
----------------------------- Pro Forma Pro Forma
Qwest(1) U S WEST(1) Adjustments Combined
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 119 $ 36 $ $ 155
Trade accounts receivable, net........... 657 1,700 2,357
Deferred income tax asset................ 69 161 230
Prepaid expenses and other............... 252 639 891
----------- ------------ -------- --------
Total current assets..................... 1,097 2,536 -- 3,633
Property and equipment, net.................... 2,827 15,098 17,925
Excess of cost over net assets acquired........ 3,395 -- 33,898 (2) 37,293
Other, net..................................... 690 1,075 1,765
----------- ------------ -------- --------
Total assets................................... $ 8,009 $ 18,709 $ 33,898 $ 60,616
=========== ============ ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................ $ 1,005 $ 4,849 $ 925 (2) $ 6,779
Long-term debt and capital lease obligations... 2,320 8,642 10,962
Other long-term liabilities.................... 283 4,298 4,581
----------- ------------ -------- --------
Total liabilities........................ 3,608 17,789 925 22,322
Stockholders' equity
Common stock and additional paid in capital 5,272 553 (553)(7) 39,165
33,893 (2)
Retained earnings (accumulated deficit).. (871) 352 (352)(7) (871)
Accumulated other comprehensive income... -- 15 (15)(7) --
----------- ------------ -------- --------
Total stockholders' equity............... 4,401 920 32,973 38,294
----------- ------------ -------- --------
Total liabilities and stockholders' equity..... $8,009 $18,709 $33,898 $60,616
=========== ============ ======== ========
</TABLE>
I-32
<PAGE>
Chapter One - The Merger
Notes to Unaudited Pro Forma Condensed Combined Financial Information
(1) See "Description of Qwest--Unaudited Pro Forma Condensed Combined
Financial Information." The
assumptions and related pro forma adjustments described below have been
developed from information available to Qwest from the December 31, 1998
Form 10-K and March 31, 1999 Form 10-Q filings of U S WEST. The pro forma
adjustments described below have been included only to the extent known
and reasonably available to Qwest. Additional information may exist that
could materially affect the assumptions and related pro forma
adjustments. Such information is not available to Qwest because it is
within the peculiar knowledge of U S WEST.
(2) Represents the allocation of the assumed purchase price to net tangible
assets acquired and goodwill. The fair value of the consideration has
been allocated to the net book value of the tangible assets and
liabilities to be acquired based upon the amounts reported in the March
31, 1999, unaudited consolidated condensed balance sheet of U S WEST
because fair value information is not reasonably available to Qwest. The
excess of the assumed consideration over the net book value of the
tangible assets acquired has been allocated to goodwill because the
existence of any identifiable intangible assets is the peculiar knowledge
of U S WEST and is not reasonably known to Qwest. The purchase price and
the excess of the purchase price over the net tangible assets acquired at
March 31, 1999, are as follows (in millions):
Shares outstanding as of March 31, 1999................... 504
Exchange ratio............................................ 1.738
-------
Equivalent of Qwest shares................................ 876
Qwest share price on June 18, 1999........................ $ 37.94
-------
33,233
Fair value of options exchanged........................... 660
-------
33,893
Add-estimated merger costs................................ 925
-------
Total consideration....................................... 34,818
Historical net book value as of March 31, 1999............ (920)
-------
Excess consideration over net assets acquired............. $33,898
========
The value of the Qwest common stock to be issued is based upon
approximately 876 million shares at a price of $37.94 per share (the
closing market price on June 18, 1999). The purchase consideration will
be based in part upon the average market price of the Qwest common stock
for a reasonable period of time before and after agreement is reached
between Qwest and U S WEST. The final determination of the purchase
consideration may differ from the amount assumed in this unaudited pro
forma condensed combined financial information and that difference may be
material.
(3) Qwest pays a fee to U S WEST for access to its network. The access cost
is included in Qwest's operating expenses and U S WEST's revenues. The
amounts included in the pro forma information have not been eliminated.
The elimination of access cost and related revenues would not have an
effect on the pro forma net earnings (loss). There are no other
significant transactions between Qwest and U S WEST.
I-33
<PAGE>
Chapter One - The Merger
(4) Reflects incremental amortization expense for the excess of the purchase
price over the net tangible assets acquired. The excess of the purchase
price over the net tangible assets acquired is being amortized over 40
years, based upon Qwest's preliminary assessment of the business to be
acquired.
(5) The merger is expected to be a tax-free transaction to the shareholders
of U S WEST. The purchase price has been allocated to the net tangible
assets acquired based upon their carrying amounts included in the U S
WEST March 31, 1999 Form 10-Q with the excess allocated to non-deductible
goodwill. To the extent the final purchase price allocation creates a
difference between the tax and financial reporting basis of assets and
liabilities acquired, deferred income taxes and additional goodwill will
be included in the pro forma unaudited condensed combined financial
information.
(6) Qwest pro forma earnings (loss) per share assumes the issuance of
approximately 876 (884 million on a fully diluted basis) million shares
at a price of $37.94 per share on January 1, 1998. The share price used
is the closing share price on June 18, 1999 for Qwest common stock.
(7) Represents the elimination of the historical equity of U S WEST.
(8) According to Schedule 14D-1 filed by U S WEST on May 21, 1999, U S WEST
agreed to make a cash tender offer for approximately 9.5% of the
outstanding Global Crossing common stock at a price of $62.75 per share
(approximately $2.5 billion). The outcome of such tender offer has not
been reflected in the pro forma financial information.
I-34
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC. PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS QWEST AND FRONTIER COMBINED Three Months Ended
March 31, 1999 (Unaudited) (Amounts in Millions, Except Per Share
Information)
<TABLE>
<CAPTION>
Historical
----------------------------- Pro Forma Pro Forma
Qwest(1) Frontier(1) Adjustments Combined
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Communications services.................. $ 737 $ 675 $ $1,412
Construction services.................... 141 -- (10)(4) 131
-------- ------ ------ ------
878 675 (10) 1,543
Operating expenses:
Operating expenses....................... 722 532 (7)(4) 1,247
Depreciation and amortization............ 96 63 69 (5) 228
-------- ------ ------ ------
818 595 62 1,475
-------- ------ ------ ------
Earnings (loss) from operations................ 60 80 (72) 68
-------- ------ ------ ------
Other expense (income):
Interest expense, net.................... 32 15 62 (3) 109
Other net................................ 3 (6) (3)
-------- ------ ------ ------
Earnings (loss) before income taxes............ 25 71 (134) (38)
Income tax expense (benefit)................... 20 31 (26)(6) 25
-------- ------ ------ ------
Net earnings (loss)............................ $ 5 $ 40 $ (108) $ (63)
======== ====== ====== ======
Net earnings (loss) per share - basic.......... $ 0.01 $(0.07)
======== ======
Net earnings (loss) per share - diluted........ $ 0.01 (7) $(0.07)
======== ======
Weighted average shares outstanding - basic.... 698 (7) 903
======== ======
Weighted average shares outstanding - diluted.. 737 903
======== ======
</TABLE>
I-35
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
QWEST AND FRONTIER COMBINED
Year Ended December 31, 1998
(Unaudited)
(Amounts in Millions, Except Per Share Information)
<TABLE>
<CAPTION>
Historical
----------------------------- Pro Forma Pro Forma
Qwest(1) Frontier(1) Adjustments Combined
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Communications services................. $ 1,554 $ 2,594 $ $ 4,148
Construction services................... 688 -- (143)(4) 545
------- ------- ------ -------
2,242 2,594 (143) 4,693
Operating expenses:
Operating expenses...................... 1,948 2,050 (103)(4) 3,895
Depreciation and amortization........... 202 226 276 5) 704
Merger costs............................ 86 -- 86
Provision for in-process R&D............ 760 -- 760
------- ------- ------ -------
2,996 2,276 173 5,445
------- ------- ------ -------
Earnings (loss) from operations............... (754) 318 (316) (752)
------- ------- ------ -------
Other expense (income):
Interest expense, net................... 97 55 250 (3) 402
Other net............................... (1) (45) (46)
------- ------- ------ -------
Earnings (loss) before income taxes........... (850) 308 (566) (1,108)
Income tax expense (benefit).................. (6) 130 (116)(6) 8
------- ------- ------ -------
Net earnings (loss)......................... $ (844) $ 178 $ (450) $(1,116)
======= ======= ====== =======
Net loss per share - basic.................... $ (1.51) (7) $ (1.46
======= =======
Net loss per share - diluted.................. $ (1.51) (7) $ (1.46)
======= =======
Weighted average shares outstanding - basic... 558 762
======= =======
Weighted average shares outstanding - diluted. 558 762
======= =======
</TABLE>
I-36
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
QWEST AND FRONTIER COMBINED
March 31, 1999
(Unaudited)
(Amounts in Millions)
<TABLE>
<CAPTION>
Historical
-------------------------- ProForma Pro Forma
Qwest(1) Frontier(1) Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash....................................... $ 119 $ 97 $ $ 216
Trade accounts receivable, net............. 657 438 1,095
Deferred income tax asset.................. 69 13 82
Prepaid expenses and other................. 252 42 294
---------- --------- --------- -------
Total current assets....................... 1,097 590 -- 1,687
Property and equipment, net...................... 2,827 1,833 4,660
Excess of cost over net assets acquired.......... 3,395 476 11,052 (2) 14,923
Other, net....................................... 690 350 83 (3) 1,123
---------- --------- --------- --------
Total assets..................................... $ 8,009 $ 3,249 $ 11,135 $ 22,393
========== ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.............................. $ 1,005 $ 580 $ 403 (2) $ 2,071
83 (3)
Long-term debt and capital lease obligations..... 2,320 1,464 3,700 (2) 7,501
17 (2)
Other long-term liabilities...................... 283 133 18 (2) 434
---------- --------- --------- --------
Total liabilities.......................... 3,608 2,177 4,221 10,006
Stockholders' equity
Preferred stock............................ -- 18 (18)(2) --
Common stock and additional paid in capital 5,272 788 (788)(8) 13,258
7,986 (2)
Treasury stock............................. -- -- -- --
Retained earnings (accumulated deficit).... (871) 306 (306)(8) (871)
Unearned compensation - restricted stock plan -- (36) 36 (8) --
Accumulated other comprehensive income..... -- (4) 4 (8) --
---------- --------- --------- --------
Total stockholders' equity................. 4,401 1,072 6,914 12,387
---------- --------- --------- --------
Total liabilities and stockholders' equity....... $ 8,009 $ 3,249 $ 11,135 $ 22,393
========== ========= ========= ========
</TABLE>
I-37
<PAGE>
Chapter One - The Merger
Notes to Unaudited Pro Forma Condensed Combined Financial Information
(1) See "Description of Qwest--Unaudited Pro Forma Condensed Combined
Financial Information." The assumptions and related pro forma adjustments
described below have been developed from information available to Qwest
from the December 31, 1998 Form 10-K and March 31, 1999 Form 10-Q filings
of Frontier. The pro forma adjustments described below have been included
only to the extent known and reasonably available to Qwest. Additional
information may exist that could materially affect the assumptions and
related pro forma adjustments. Such information is not available to Qwest
because it is within the peculiar knowledge of Frontier.
(2) Represents the allocation of the assumed purchase price to net tangible
assets acquired and goodwill. The fair value of the consideration has
been allocated to the net book value of the tangible assets and
liabilities (except for Frontier's 10.46% convertible debentures) to be
acquired based upon the amounts reported in the March 31, 1999, unaudited
consolidated condensed balance sheet of Frontier because fair value
information is not reasonably available to Qwest. The 10.46% convertible
debentures have been adjusted to fair value based upon the exchange ratio
and Qwest's share price on June 18, 1999. The excess of the assumed
consideration over the net book value of the tangible assets acquired has
been allocated to goodwill because the existence of any identifiable
intangible assets is the peculiar knowledge of Frontier and is not
reasonably known to Qwest. The purchase price and the excess of the
purchase price over the net tangible assets acquired at March 31, 1999,
are as follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Shares outstanding as of March 31, 1999............ 173
Exchange ratio..................................... 1.181
-------
Equivalent of Qwest shares......................... 204
Qwest share price on June 18, 1999................. $37.94
-------
7,740
Fair value of options exchanged.................... 246
-------
7,986
Add-cash consideration............................. 3,700
Add-estimated merger costs......................... 403
-------
Total consideration................................ 12,089
Historical net book value as of March 31, 1999..... (1,072)
Redeemable preferred stock......................... 18
Adjustment of convertible debt to fair value....... 17
-------
$11,052
=======
</TABLE>
The value of the Qwest common stock to be issued is based upon
approximately 204 million shares at a price of $37.94 per share (the
closing market price on June 18, 1999). The purchase consideration will
be based in part upon the average market price of the Qwest common stock
for a reasonable period of time before and after agreement is reached
between Qwest and Frontier. The final determination of the purchase
consideration may differ from the amount assumed in the unaudited pro
forma condensed financial information and that difference may be
material.
(3) Represents assumed interest expense of $250 million annually ($62 million
for the three months ended March 31, 1999) on the issuance of $3,700
million of debt to fund the cash portion of the purchase consideration.
I-38
<PAGE>
Chapter One - The Merger
Such interest expense was calculated at Qwest's approximate borrowing
rate of 6.75 percent at March 31, 1999. A 1/8 percentage point change in
the assumed financing rate would change interest expense by $5 million
annually ($1 million for the three months ended March 31, 1999). Interest
expense includes amortization of assumed debt issuance costs of $83
million over the term of the debt.
(4) Represents the elimination of revenues and cost of sales related to the
sale of dark fiber along Qwest's communications network to Frontier.
There are no other significant transactions between Qwest and Frontier.
(5) Reflects incremental amortization expense for the excess of the purchase
price over the net tangible assets acquired. The excess of the purchase
price over the net tangible assets acquired is being amortized over 40
years, based upon Qwest's preliminary assessment of the business to be
acquired.
(6) Reflects the estimated income tax effect of the pro forma adjustments
based upon combined federal and state statutory rate of approximately
40%. The merger is expected to be a tax-free transaction to the
shareholders of Frontier (except for the cash paid to Frontier's
shareholders). The purchase price has been allocated to the net tangible
assets acquired based principally upon their carrying amounts included in
the Frontier March 31, 1999 Form 10-Q with the excess allocated to
non-deductible goodwill. To the extent the final purchase price
allocation creates a difference between the tax and financial reporting
basis of assets and liabilities acquired, deferred income taxes and
additional goodwill will be included in the pro forma unaudited condensed
combined financial information.
(7) Qwest pro forma loss per share assumes the issuance of approximately 204
million shares at a price of $37.94 per share on January 1, 1998. The
share price used is the closing share price on June 18, 1999 for Qwest
common stock.
(8) Represents the elimination of the historical equity of Frontier.
I-39
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
QWEST, U S WEST AND FRONTIER COMBINED
Three Months Ended March 31, 1999
(Unaudited)
(Amounts in Millions, Except Per Share Information)
<TABLE>
<CAPTION>
Historical
-------------------------- Pro Forma Pro Forma
Qwest(1) U S WEST(1) Frontier(1) Adjustments Combined
-------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Communications services.......... $ 737 $3,182 $675 $ -- $4,594
Construction services............ 141 -- -- (10)(4) 131
-------- ------ ---- ----- ------
878 3,182 675 (10) 4,725
Operating expenses:
Operating expenses............... 722 1,787 532 (7)(4) 3,034
Depreciation and amortization.... 96 602 63 289 (2) 1,050
818 2,389 595 282 4,084
-------- ------ ---- ----- ------
Earnings (loss) from operations....... 60 793 80 (292) 641
-------- ------ ---- ----- ------
Other expense (income):
Interest expense, net............ 32 153 15 62 (3) 262
Other net........................ 3 1 (6) -- (2)
-------- ------ ---- ----- ------
Earnings (loss) before income taxes... 25 639 71 (354) 381
Income tax expense (benefit).......... 20 242 31 (26)(6) 267
-------- ------ ---- ----- ------
Net earnings (loss)................... $ 5 $ 397 $ 40 $(328) $ 114
======== =======
Net loss per share - basic............ $ 0.01 (7) $ 0.06
======== =======
Net loss per share - diluted.......... $ 0.01 (7) $ 0.06
======== =======
Weighted average shares outstanding -
basic................................. 698 1,809
======== =======
Weighted average shares outstanding -
diluted............................... 737 1,861
======== =======
</TABLE>
I-40
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
QWEST, U S WEST AND FRONTIER COMBINED
Year Ended December 31, 1998
(Unaudited)
(Amounts in Millions, Except Per Share Information)
<TABLE>
<CAPTION>
Historical
---------------------------------------- Pro Forma Pro Forma
Qwest(1) U S WEST(1) Frontier(1) Adjustments Combined
-------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Communications services......... $ 1,554 $12,378 $2,594 $ -- $16,526
Construction services........... 688 -- -- (143)(4) 545
------- ------- ------ ------- -------
2,242 12,378 2,594 (143) 17,071
Operating expenses:
Operating expenses.............. 1,948 7,130 2,050 (103)(4) 11,025
Depreciation and amortization... 202 2,199 226 1,155 (5) 3,782
Merger costs.................... 86 -- -- -- 86
Provision for in-process R&D.... 760 -- -- -- 760
------- ------- ------ ------- --------
2,996 9,329 2,276 1,052 15,653
------- ------- ------- ------- -------
Earnings (loss) from operations....... (754) 3,049 318 (1,195) 1,418
------- ------- ------ -------- -------
Other expense (income):
Interest expense, net........... 97 543 55 250 (3) 945
Other net....................... (1) 87 (45) -- 41
------- ------- ------ -------- -------
Earnings (loss) before income taxes... (850) 2,419 308 (1,445) 432
Income tax expense (benefit).......... (6) 911 130 (116)(6) 919
------- ------- ------ -------- -------
Net earnings (loss)................... $ (844) $ 1,508 $ 178 $(1,329) $ (487)
======= ======= ====== ======== =======
Net loss per share - basic............ $ (1.51) (7) $ (0.29)
======= =======
Net loss per share - diluted.......... $ (1.51) (7) $ (0.29
======= =======
Weighted average shares outstanding -
basic................................. 558 1,669
======= =======
Weighted average shares outstanding -
diluted............................... 558 1,669
======= =======
</TABLE>
I-41
<PAGE>
Chapter One - The Merger
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
QWEST, U S WEST AND FRONTIER COMBINED
March 31, 1999
(Unaudited)
(Amounts in Millions)
<TABLE>
<CAPTION>
Historical
ProForma Pro Forma
Qwest(1) U S WEST(1) Frontier(1) Adjustments Combined
-------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................................. $119 $36 $97 $ $ 252
Trade accounts receivable, net........ 657 1,700 438 2,795
Deferred income tax asset............. 69 161 13 243
Prepaid expenses and other............ 252 639 42 933
-------- ------- ------ ------- -------
Total current assets.................. 1,097 2,536 590 -- 4,223
Property and equipment, net................ 2,827 15,098 1,833 19,758
Excess of cost over net assets acquired.... 3,395 -- 476 46,203 (2) 50,074
Other, net................................. 690 1,075 350 83 (3) 2,198
-------- ------- ------ ------- -------
Total assets............................... $8,009 $18,709 $3,249 $46,286 $76,253
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities........................ $1,005 $4,849 $580 $1,328 (2) $7,845
83 (3)
Long-term debt and capital lease
obligations............................... 2,320 8,642 1,464 3,700 (2) 16,143
17 (2)
Other long-term liabilities................ 283 4,298 133 18 (2) 4,732
-------- ------- ------ ------- -------
Total liabilities..................... 3,608 17,789 2,177 5,146 28,720
Stockholders' equity
Preferred stock....................... -- -- 18 (18)(2) --
Common stock and additional paid in
capital................................. 5,272 553 788 43,132 (2) 48,404
(1,341)(8)
Retained earnings (accumulated deficit) (871) 352 306 (658)(8) (871)
-- -- (36) 36 (8) --
Accumulated other comprehensive
income................................... -- 15 (4) (11)(8) --
Total stockholders' equity............ 4,401 920 1,072 41,140 47,533
-------- ------- ------ ------- -------
Total liabilities and stockholders' equity. $8,009 $18,709 $3,249 $46,286 $76,253
======== ======= ====== ======= =======
</TABLE>
I-42
<PAGE>
Chapter One - The Merger
Notes to Unaudited Pro Forma Condensed Combined Financial Information
(1) See "Description of Qwest--Unaudited Pro Forma Condensed Combined
Financial Information." The assumptions and related pro forma adjustments
described below have been developed from information available to Qwest
from the December 31, 1998 Form 10-K and March 31, 1999 Form 10-Q filings
of Frontier and U S WEST. The pro forma adjustments described below have
been included only to the extent known and reasonably available to Qwest.
Additional information may exist that could materially affect the
assumptions and related pro forma adjustments. Such information is not
available to Qwest because it is within the peculiar knowledge of
Frontier and U S WEST.
(2) Represents the allocation of the assumed purchase price to net tangible
assets acquired and goodwill. The fair value of the consideration has
been allocated to the net book value of the tangible assets and
liabilities (except for Frontier's 10.46% convertible debentures) to be
acquired based upon the amounts reported in the March 31, 1999, unaudited
consolidated condensed balance sheets of Frontier and U S WEST because
fair value information is not reasonably available to Qwest. The 10.46%
convertible debentures have been adjusted to fair value based upon the
exchange ratio and Qwest's share price on June 18, 1999. The excess of
the assumed consideration over the net book value of the tangible assets
acquired has been allocated to goodwill because the existence of any
identifiable intangible assets is the peculiar knowledge of Frontier and
U S WEST and is not reasonably known to Qwest. The purchase price and the
excess of the purchase price over the net tangible assets acquired at
March 31, 1999, are as follows (in millions):
<TABLE>
<CAPTION>
U S WEST FRONTIER COMBINED
--------------- -------------- --------------
<S> <C> <C> <C>
Shares outstanding as of March 31, 1999................ 504 173
Exchange ratio......................................... 1.783 1.226
------- ------- -------
Equivalent of Qwest shares............................. 899 212 1,111
Qwest share price on June 18, 1999..................... $ 37.94 $ 37.94 $ 37.94
------- ------- -------
34,108 8,043 42,151
Fair value of options exchanged........................ 708 273 981
------- ------- -------
34,816 8,316 43,132
Add-cash consideration................................. -- 3,700 3,700
Add-estimated merger costs............................. 925 403 1,328
------- ------- -------
Total consideration.................................... 35,741 12,419 48,160
Historical net book value as of March 31, 1999......... (920) (1,072) (1,992)
Redeemable preferred stock............................ -- 18 18
Adjustment of convertible debt to fair value.......... -- 17 17
------- ------- -------
Excess consideration over net assets acquired.......... $34,821 $11,382 $46,203
======= ======= =======
</TABLE>
The value of the Qwest common stock to be issued is based upon
approximately 1,111 million shares at a price of $37.94 per share (the
closing market price on June 18, 1999). The purchase consideration will
be based in part upon the average market price of the Qwest common stock
for a reasonable period of time before and after agreement is reached
between Qwest, Frontier and U S WEST. The final determination of the
purchase consideration may differ from the amount assumed in the
unaudited pro forma condensed financial information and that difference
may be material.
(3) Represents assumed interest expenses of $250 million annually ($62
million for the three months ended March 31, 1999) on the issuance of
$3,700 million of debt to fund the cash portion of the purchase
consideration.
I-43
<PAGE>
Chapter One - The Merger
Such interest expense was calculated at Qwest's approximate borrowing
rate of 6.75 percent at March 31, 1999. A 1/8 percentage point change in
the assumed financing rate would change interest expense by $5 million
annual ($1 million for the three months ended March 31, 1999). Interest
expense includes amortization of assumed debt issuance costs of $83
million over the term of the debt.
(4) Represents the elimination of revenues and cost of sales related to the
sale of dark fiber along Qwest's communications network to Frontier.
Furthermore, Qwest pays a fee to U S WEST for access to its network. The
access cost is included in Qwest's operating expenses and U S WEST's
revenues. The amounts included in the pro forma financial information have
not been eliminated. The elimination of access cost and related revenues
would not have an effect on the pro forma net earnings (loss). There are no
other significant transactions between Qwest and U S WEST and Qwest and
Frontier. Qwest is not aware whether or not there exists significant
transactions between U S WEST and Frontier.
(5) Reflects incremental amortization expense for the excess of the purchase
price over the net tangible assets acquired. The excess of the purchase
price over the net tangible assets acquired is being amortized over 40
years, based upon Qwest's preliminary assessment of the businesses to be
acquired.
(6) Reflects the estimated income tax effect of the pro forma adjustments based
upon combined federal and state statutory rate of approximately 40%. The
merger is expected to be a tax-free transaction to the shareholders of U S
WEST and Frontier (except for the cash portion paid to Frontier
shareholders). The purchase price has been allocated to the net tangible
assets acquired based upon their carrying amounts included in the U S WEST
and Frontier March 31, 1999 Form 10-Qs with the excess allocated to
non-deductible goodwill. To the extent the final purchase price allocation
creates a difference between the tax and financial reporting basis of
assets and liabilities acquired, deferred income taxes and additional
goodwill will be included in the pro forma unaudited condensed combined
financial information.
(7) Qwest pro forma net earnings (loss) per share assumes the issuance of
approximately 1,111 million shares (1,124 million shares on a fully
diluted basis) at a price of $37.94 per share on January 1, 1998. The
share price used is the closing share price on June 18, 1999 for Qwest
common stock.
(8) Represents the elimination of the historical equity of U S WEST and
Frontier.
(9) According to Schedule 14D-1 filed by U S WEST on May 21, 1999, U S WEST
agreed to make a cash tender offer for approximately 9.5% of the
outstanding Global Crossing common stock at a price of $62.75 per share
(approximately $2.5 billion). The outcome of such tender offer has not
been reflected in the pro forma financial information.
I-44
<PAGE>
Chapter One - The Merger
OPINIONS OF FINANCIAL ADVISORS
[To come.]
I-45
<PAGE>
Chapter One - The Merger
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
[To come.]
I-46
<PAGE>
Chapter One - The Merger
SEE CAUTIONARY NOTE ON COVER PAGE
AS OF THE DATE OF FILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NO MERGER
AGREEMENT HAS BEEN EXECUTED BETWEEN QWEST AND U S WEST. THE FOLLOWING
DESCRIPTION DESCRIBES PROVISIONS IN QWEST'S MERGER PROPOSAL TO U S WEST THAT
WOULD OCCUR IF AND ONLY IF THE TRANSACTION PROPOSED BY QWEST TO U S WEST ON JUNE
13, 1999 WERE ACCEPTED IN ITS CURRENT FORM.
THE U S WEST MERGER AGREEMENT
The following summary of the proposed U S WEST merger agreement is
qualified by reference to the complete text of the merger agreement, which is
incorporated by reference and attached as Annex __.
Structure of the Merger
Under the merger agreement, U S WEST merger sub will merge into U S WEST
so that U S WEST becomes a wholly-owned subsidiary of Qwest.
Timing of Closing
The closing will occur as soon as practicable after the day on which the
last of the conditions set forth in the merger agreement has been satisfied or
waived. We expect that, as promptly as practicable after the closing of the
merger, we will file a merger certificate with the Secretary of State of the
State of Delaware, at which time the merger will be effective.
Merger Consideration
The merger agreement provides that each share of U S WEST common stock
outstanding immediately prior to the effective time will, at the effective
time, be converted into the right to receive [____] shares of Qwest common
stock. However, any shares of U S WEST common stock held by U S WEST as
treasury stock or owned by Qwest or any subsidiary of Qwest will be canceled
without any payment for those shares. Shares held in U S WEST's employee
pension and compensation plans will be deemed issued and outstanding and will
not be treated as treasury stock for this purpose.
Treatment of U S WEST Stock Options
At the effective time, each outstanding option, warrant and other right
granted by U S WEST to purchase shares of U S WEST common stock will be
converted into an option, warrant or other right to acquire Qwest common stock
having the same terms and conditions as the U S WEST stock option, warrant or
right had before the effective time. The number of shares that the new Qwest
option, warrant or right will be exercisable for and the exercise price of the
new Qwest option, warrant or right will reflect the exchange ratio in the
merger.
I-47
<PAGE>
Chapter One - The Merger
Exchange of Shares
We will appoint an exchange agent to handle the exchange of U S WEST
stock certificates in the merger for Qwest stock and the payment of cash for
fractional shares of U S WEST stock. Soon after the effective time, the
exchange agent will send to each holder of U S WEST stock a letter of
transmittal for use in the exchange and instructions explaining how to
surrender U S WEST stock certificates to the exchange agent. Holders of U S
WEST stock that surrender their certificates to the exchange agent, together
with a properly completed letter of transmittal, will receive the appropriate
merger consideration. Holders of unexchanged shares of U S WEST stock will not
be entitled to receive any dividends or other distributions payable by Qwest
after the effective time until their certificates are surrendered.
Qwest will not issue any fractional shares in the merger. Holders of U S
WEST common stock will receive a cash payment in the amount of the proceeds
from the sale of their fractional shares in the market.
Qwest Board
Qwest has agreed to take the necessary corporate action so that, at the
effective time, U S WEST's Chairman of the Board and _____ directors
designated by U S WEST will become directors of Qwest. Qwest expects that, at
the effective time, U S WEST's Chairman of the Board will become Vice-Chairman
of the Qwest Board.
Certain Covenants
Each of Qwest and U S WEST has undertaken certain covenants in the merger
agreement. The following summarizes the more significant of these covenants.
No Solicitation. U S WEST and Qwest have agreed that they and their
subsidiaries and their officers, directors, employees and advisers will not
take action to solicit or encourage an offer for an alternative acquisition
transaction involving U S WEST or Qwest of a nature defined in the merger
agreement.
Restricted actions include engaging in discussions or negotiations with
any potential bidder, or furnishing information relating to either party or
its subsidiaries to a potential bidder. These actions are permitted in
response to an unsolicited offer so long as such unsolicited offer is made
prior to the time that the U S WEST or Qwest stockholder approval as the case
may be, is obtained and so long as prior to doing so: o the U S WEST or Qwest
Board, as the case may be, determines in its good faith judgment that it is
necessary to do so to comply with its fiduciary duty to shareholders, after
receiving the advice of outside legal counsel, and o U S WEST or Qwest, as the
case may be, receives from such person an executed confidentiality agreement
with terms no less favorable to such party than those contained in the
existing confidentiality agreement between U S WEST and Qwest.
Each of U S WEST and Qwest must keep the other reasonably informed of the
status and details of any offer.
U S WEST Board's Covenant to Recommend. The U S WEST Board has agreed to
recommend the approval and adoption of the merger agreement to U S WEST's
shareholders. However, the U S WEST Board is permitted not to make, to
withdraw or to modify in a manner adverse to Qwest this recommendation if o
the U S WEST Board determines in its good faith judgment that the failure to
do so would result in a reasonable possibility that it would breach its
fiduciary duty to U S WEST shareholders under applicable law, after receiving
the advice of outside counsel, and o U S WEST's Board has given Qwest five
business days to enhance its offer to the extent necessary to permit U S
WEST's Board to recommend the transaction to its shareholders in compliance
with such fiduciary duty.
I-48
<PAGE>
Chapter One - The Merger
Qwest Board's Covenant to Recommend. The Qwest Board has agreed to
recommend the approval of the merger agreement to Qwest's shareholders.
However, the Qwest Board is permitted not to make, to withdraw or to modify in
a manner adverse to U S WEST this recommendation if o the Qwest Board
determines in its good faith judgment that the failure to do so would result
in a reasonably possibility that it would breach its fiduciary duty to Qwest
shareholders under applicable law, after receiving the advice of outside
counsel, and o Qwest's Board has given U S WEST five business days to enhance
its offer to the extent necessary to permit Qwest's Board to recommend the
transaction to its shareholders in compliance with such fiduciary duty.
Interim Operations of Qwest and U S WEST. Qwest and U S WEST are required
to conduct their business in the ordinary course consistent with past practice
until the effective time and, subject to certain exceptions, may not engage in
certain material transactions during this period such as material acquisitions
or dispositions and issuances or repurchases of stock.
Cooperation Covenant. Qwest and U S WEST have agreed to cooperate with
each other and use their best efforts to take all actions and do all things
necessary or advisable under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement.
Employee Benefits Matters. Except as may be otherwise agreed between
Qwest and U S WEST, Qwest has no obligation after the effective time to
maintain the U S WEST employee benefit plans as separate from the Qwest
employee benefit plans.
Indemnification and Insurance of Qwest and U S WEST Directors and
Officers. The merger agreement provides that for six years after the effective
time:
o U S WEST and Qwest shall maintain in effect the current provisions
regarding indemnification of officers and directors contained in
the charter and bylaws of U S WEST and Qwest and each of their
respective subsidiaries and any directors, officers or employees
indemnification agreements of U S WEST and Qwest and their
respective subsidiaries;
o U S WEST and Qwest shall maintain in effect the current policies of
directors' and officers' liability insurance and fiduciary
liability insurance maintained by U S WEST and Qwest, respectively,
(except that U S WEST may substitute policies which are, in the
aggregate, no less advantageous to the insured in any material
respect) with respect to claims arising from facts or events which
occurred on or before the effective time; and
o U S WEST and Qwest shall indemnify the directors and officers of U
S WEST and Qwest, respectively, to the fullest extent to which each
is permitted to indemnify such officers and directors under its
respective charters and bylaws and applicable law.
Certain Other Covenants. The merger agreement contains mutual covenants of
the parties typical for a transaction involving a merger of equals.
Representations and Warranties
The merger agreement contains substantially reciprocal representations
and warranties made by Qwest and U S WEST customary for a merger of equals
transaction.
The representations and warranties in the merger agreement do not survive
the closing or termination of the merger agreement.
I-49
<PAGE>
Chapter One - The Merger
Conditions to the Completion of the Merger
Mutual Closing Conditions. The obligations of Qwest and U S WEST to
complete the merger are subject to the satisfaction or, to the extent legally
permissible, waiver of the following conditions:
o approval by the Qwest and U S WEST shareholders;
o expiration of the HSR Act waiting period;
o receipt of all required regulatory approvals or permits for
completion of the merger other than those the failure of which to
obtain would not have a material adverse effect;
o receipt by Qwest and U S WEST of consents or approvals from any
person required for completion of the merger;
o absence of a legal prohibition on completion of the merger;
o Qwest's registration statement on Form S-4, which includes this joint
proxy statement/prospectus, being effective and not subject to any
stop order by the SEC;
o approval for the listing on the NASDAQ National Market of the shares
of Qwest common stock to be issued in the merger;
o receipt by Qwest and U S WEST of opinions from their respective
counsel that the U S WEST merger will qualify as a tax-free
reorganization and will not affect the tax-free qualification of the
prior spin-off of U S WEST;
o accuracy as of closing of the representations and warranties made by
the other party to the extent specified in the merger agreement; and
o performance in all material respects by the other party of the
obligations required to be performed by it at or prior to closing.
Additional Closing Conditions for Qwest's Benefit. Qwest's obligation to
complete the merger is subject to the following additional condition:
o Qwest shall have received executed agreements from each affiliate of
U S WEST.
Additional Closing Conditions for U S WEST's Benefit. U S WEST's
obligation to complete the merger is subject to the following additional
condition:
o Qwest shall have taken all actions necessary such that the
composition of Qwest's Board will be as contemplated by the merger
agreement after the effective time.
Termination of the Merger Agreement
Right to Terminate. The merger agreement may be terminated at any time
prior to the effective time in any of the following ways:
I-50
<PAGE>
Chapter One - The Merger
(a) The merger agreement may be terminated by mutual written consent of
Qwest and U S WEST; or
(b) The merger agreement may be terminated by either Qwest or U S WEST
if:
o the merger has not been completed by ________, ____. However, that
date becomes ________, ____ if the reason for not closing by
________, ____ is that the regulatory conditions specified in the
merger agreement have not been satisfied by that date,
o Qwest or U S WEST shareholders fail to give the necessary approval
at a duly held meeting,
o there is a permanent legal prohibition to closing the merger,
o the Board of the other party fails to recommend the merger or
withdraws or modifies in any adverse manner its approval or
recommendation of the merger, or recommends a superior offer, or
o (1) the other party breaches or fails to perform in any material
respect any of its representations, warranties, covenants or other
agreements in a manner that cannot be cured by ________, ____
(with a possible extension to ________, ____) or (2) a condition
to the terminating party's obligations to consummate the merger
cannot be satisfied prior to ________, ____ (with a possible
extension to ________, ____); or
(c) The merger agreement may be terminated by either Qwest or U S WEST
prior to approval by its stockholders if:
o the Board of the terminating party determines in good faith, in
response to a superior alternative proposal and after advice from
outside counsel, that the failure to terminate the merger
agreement in order to accept the superior proposal would result in
a reasonable likelihood that the Board would breach its fiduciary
duties to its stockholders, and
o the terminating party has complied with the requirements
associated with the receipt of such superior proposals as provided
in the merger agreement.
Neither Qwest or U S WEST can terminate the merger agreement for the
reasons described in the first bullet under paragraph (b) above if its failure
to fulfill in any material respect its obligations under the merger agreement
has resulted in the failure to complete the merger.
If the merger agreement is validly terminated, the agreement will become
void without any liability on the part of any party unless such party is in
willful breach thereof. However, the provisions of the merger agreement
relating to expenses and termination fees, as well as the confidentiality
agreement entered into between Qwest and U S WEST, will continue in effect
notwithstanding termination of the merger agreement.
Termination Fees Payable by U S WEST. U S WEST has agreed to pay Qwest a
cash amount equal to $850 million in any of the following circumstances:
I-51
<PAGE>
Chapter One - The Merger
o U S WEST terminates the merger agreement as described in paragraph
(c) under "--Right to Terminate" above;
o Qwest terminates the merger agreement because the U S WEST Board
fails to recommend the merger to its stockholders or withdraws or
modifies in any adverse manner its approval or recommendation of the
merger, or recommends a superior offer;
o the merger agreement is terminated after the stockholders of U S WEST
do not approve the merger, and prior to such termination the U S WEST
Board failed to recommend the merger to its stockholders or withdrew
or modified in any adverse manner its approval or recommendation of
the merger, or recommended a superior proposal;
o the merger agreement is terminated because the stockholders of U S
WEST do not approve the merger and:
o at any time prior to the stockholder vote there had been an offer or
proposal for an alternative transaction and
o within 12 months of such termination, U S WEST enters into an
agreement with any third party with respect to an alternative
transaction; or
o Qwest terminates the merger agreement because U S WEST fails to use
reasonable efforts to file the registration statement relating to the
transaction or to promptly hold its stockholders' meeting.
Termination Fees Payable by Qwest. Qwest has agreed to pay U S WEST a
cash amount equal to $850 million if the merger agreement is terminated under
exactly corresponding provisions as applied to U S WEST's payment of
termination fees, with the positions of the parties reversed.
Reduction of Termination Fees Payable by U S WEST. If U S WEST is
required to pay a termination fee, the amount of the fee may be reduced by an
amount of up to $250 million equal to any amount U S WEST pays Qwest for
capacity on Qwest's systems.
Other Expenses
Except as described in the merger agreement, all costs and expenses
incurred in connection with the merger agreement and related transactions will
be paid by the party incurring such costs or expenses. Certain expenses
incurred in connection with the printing of the joint proxy
statement/prospectus and certain filing fees will be shared equally by Qwest
and U S WEST.
Amendments and Waivers
Amendments. Any provision of the merger agreement may be amended prior to
the effective time if the amendment is in writing and signed by Qwest and U S
WEST. After the approval of the merger agreement by the shareholders of either
Qwest or U S WEST, no amendment may be made which would:
o alter or change the amount or kinds of consideration to be received
by the holders of U S WEST or Qwest common stock upon consummation of
the merger;
o alter or change any term of the charter documents of either Qwest or
U S WEST; or
I-52
<PAGE>
Chapter One - The Merger
o alter or change any of the terms and conditions of the merger
agreement if such alteration or change would adversely affect the
holders of any class or series of securities of Qwest or U S WEST.
Waiver. At any time before the effective time, by a waiver in writing and
signed by the party against whom the waiver is to be effective, any party may:
o extend the time for the performance of any of the obligations or
other acts of the other parties;
o waive any inaccuracies in the representations and warranties
contained in any document delivered in connection with the
transaction; or
o waive compliance with any of the agreements or conditions contained
herein.
I-53
<PAGE>
Chapter One - The Merger
SEE CAUTIONARY NOTE ON COVER PAGE
AS OF THE DATE OF FILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NO
MERGER AGREEMENT HAS BEEN EXECUTED BETWEEN QWEST AND FRONTIER. THE FOLLOWING
DESCRIPTION DESCRIBES PROVISIONS IN QWEST'S MERGER PROPOSAL TO FRONTIER THAT
WOULD OCCUR IF AND ONLY IF THE TRANSACTION PROPOSED BY QWEST TO FRONTIER ON
JUNE 13, 1999 WERE ACCEPTED IN ITS CURRENT FORM.
THE FRONTIER MERGER AGREEMENT
The following summary of the Frontier merger agreement is qualified by
reference to the complete text of the merger agreement, which is incorporated
by reference and attached as Annex __.
Structure of the Merger
Under the merger agreement, Qwest will form Frontier merger sub, a
wholly-owned subsidiary. Frontier will merge with and into Frontier merger
sub, leaving Frontier merger sub as the surviving entity.
Timing of Closing
The closing will occur on the second business day after the day on which
the last of the conditions set forth in the merger agreement has been
satisfied or waived. We expect that, as promptly as practicable after the
closing of the merger, we will file a merger certificate with the New York
Department of State, at which time the merger will be effective.
Merger Consideration
The merger agreement provides that each share of Frontier common stock
outstanding immediately prior to the effective time will, at the effective
time, be converted into o the right to receive [___] shares of Qwest common
stock and o $20 in cash. However, any shares of Frontier common stock held by
Frontier as treasury stock or owned by Qwest or any subsidiary of Qwest will
be canceled without any payment for those shares.
Treatment of Frontier Stock Options and Warrants
Each Frontier stock option and warrant shall be deemed to constitute an
option to acquire or a warrant to acquire the number of shares of Qwest common
stock as the holder of each such Frontier stock option or warrant would have
been entitled to receive had such holder exercised such Frontier stock option
or warrant in full immediately prior to the effective time. The same terms and
conditions as were applicable under such Frontier stock option or warrant
shall apply to the stock options and warrants assumed by Qwest as
comprehensively set forth in the merger agreement.
I-54
<PAGE>
Chapter One - The Merger
Exchange of Shares
We will appoint an exchange agent to handle the exchange of Frontier
stock certificates in the merger for Qwest stock and the payment of cash for
fractional shares of Frontier stock. Soon after the effective time, the
exchange agent will send to each holder of Frontier stock a letter of
transmittal for use in the exchange and instructions explaining how to
surrender Frontier stock certificates to the exchange agent. Holders of
Frontier stock that surrender their certificates to the exchange agent,
together with a properly completed letter of transmittal, will receive the
appropriate merger consideration. Holders of unexchanged shares of Frontier
stock will not be entitled to receive any dividends or other distributions
payable by Qwest after the effective time until their certificates are
surrendered.
Qwest will not issue any fractional shares in the merger. Holders of
Frontier common stock will receive a cash payment in the amount of the
proceeds from the sale of their fractional shares in the market.
Qwest Board
Qwest has agreed to take the necessary corporate action so that, at the
effective time, [__] directors designated by Frontier will become directors of
Qwest.
Certain Covenants
Each of Qwest and Frontier has undertaken certain covenants in the merger
agreement. The following summarizes the more significant of these covenants:
No Solicitation by Frontier. Frontier has agreed that it and its
subsidiaries and their officers, directors, employees and advisers will not
take action to solicit or encourage an offer for an alternative transaction
involving Frontier of a nature defined in the merger agreement.
Restricted actions include engaging in discussions or negotiations with
any potential bidder, or furnishing information relating to Frontier or its
subsidiaries to a potential bidder. These actions are permitted in response to
an unsolicited bona fide written proposal so long as such a proposal is made
prior to the time that Frontier stockholder approval is obtained and so long
as:
o prior to engaging in discussions or providing information to such
potential bidder, the Frontier Board concludes in good faith that
the proposal could reasonably be expected to constitute a superior
proposal;
o prior to recommending the proposal or withdrawing/modifying its
recommendation with respect to the transactions contemplated by the
merger agreement, the Frontier Board concludes in good faith that
the proposal would, if consummated, constitute a superior proposal;
o prior to providing any information or data to a potential bidder,
such potential bidder enters into a confidentiality and standstill
agreement similar to the Frontier/Qwest confidentiality and
standstill agreement; and
o prior to providing any information to or entering into discussions
with such potential bidder, Frontier promptly notifies Qwest of the
proposal and discloses the potential bidder's identity.
Frontier must keep Qwest informed, on a current basis, of the status and
terms of any proposal or offer and the status of any such discussions or
negotiations.
I-55
<PAGE>
Chapter One - The Merger
Frontier Board's Covenant to Recommend. The Frontier Board has agreed to
recommend the approval and adoption of the merger agreement to Frontier's
shareholders. However, the Frontier Board is permitted not to make, to
withdraw or to modify in a manner adverse to Qwest this recommendation if the
Frontier Board concludes in good faith that an unsolicited bona fide written
proposal submitted by a third party bidder would, if consummated, constitute a
superior proposal.
Qwest Board's Covenant to Recommend. The Qwest Board has agreed to
recommend the approval of the merger agreement to Qwest's shareholders, but
has no obligation to call, give notice of, convene and hold a meeting of its
shareholders until such time as Frontier is obligated to do so with respect to
its shareholders.
Interim Operations of Qwest and Frontier. Qwest and Frontier are required
to conduct their business in the ordinary course consistent with past practice
until the effective time and subject to certain exceptions, may not engage in
certain material transactions during this period such as material acquisitions
or dispositions and issuances or repurchases of stock.
Additionally, Frontier may not, without first obtaining the written
consent of Qwest:
o incur capital expenditures, except in the ordinary course of
business consistent with past practice (within certain aggregate
dollar limits);
o incur indebtedness, except in connection with permitted
acquisitions or arrangements in existence on ______________ for use
in the ordinary course of business;
o pay or discharge indebtedness, other than indebtedness incurred in
the ordinary course of business;
o increase the compensation of senior officers, increase any employee
benefits or adopt any new benefit plan other than as permitted by
the merger agreement or in the ordinary course of business;
o take any action to make its rights agreement dated as of April 9,
1995 between Frontier and First National Bank of Boston
inapplicable to any transaction other than a transaction that the
Frontier Board has determined to be a superior proposal; or
o split, combine or reclassify any of its capital stock or exchange any
other securities for its capital stock.
Additionally, Qwest has agreed that prior to the closing it will not,
without the prior written consent of Frontier, enter into any business
combination, merger or similar transaction where its shareholders would
receive any consideration in exchange for their shares of Qwest common stock
unless the transaction will close after the closing of the merger agreement,
the transaction would not disqualify the Frontier merger as a reorganization
for tax purposes and the consideration paid to Qwest shareholders in the
transaction meets a minimum threshold.
Best Efforts Covenant. Qwest and Frontier have agreed to cooperate with
each other and use their best efforts to take all actions and do all things
necessary or advisable under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement.
Employee Benefits Matters. Qwest agrees that the combined company will
maintain Frontier's employee benefits at current levels as well as certain
specified employee benefit plans (including a "change in control severance
plan") for two years after the effective time, and will provide $35 million in
retention bonuses to employees of Frontier below the level of Vice-President.
I-56
<PAGE>
Chapter One - The Merger
Indemnification and Insurance of Qwest and U S WEST Directors and
Officers. The merger agreement provides that the surviving corporation shall
cause to be maintained in effect in its certificate of incorporation and
by-laws:
o for a period of six years after the effective time, the current
provisions regarding elimination of liability of directors and
indemnification of officers, directors and employees; and
o for a period of six years, the current policies of directors' and
officers' liability insurance and fiduciary liability insurance
maintained by Frontier with respect to claims arising from facts or
events that occurred on or before the effective time, so long as
such policies are no less favorable than the Frontier policy in
effect on the day the merger is effective, except that the
surviving company will only be obligated to pay up to 200% of the
annual premium paid by Frontier for such insurance as of the day
the merger is effective.
Voting Trust. Qwest and Frontier have agreed that, if at any time prior
to the Frontier meeting, a third party shall make an unsolicited offer to
acquire control of Frontier, which offer is not recommended by Frontier's
Board, then Qwest and Frontier will use their reasonable best efforts to
consummate the merger by implementing a "voting trust" or similar structure
permitting the merger prior to the receipt of all final regulatory approvals.
Redemption of Frontier Preferred Stock. Prior to the Frontier meeting,
Frontier shall take all actions as are necessary to redeem all the Frontier
preferred stock then outstanding, using its own cash, and in compliance with
the applicable provisions as set forth in its restated certificate of
incorporation.
Representations and Warranties
The merger agreement contains substantially reciprocal representations
and warranties made by Qwest and Frontier to each other. The most significant
of these relate to:
o corporate authorization to enter into the contemplated transaction o
the shareholder votes required to approve the contemplated transaction o
governmental approvals required in connection with the contemplated
transaction o absence of any breach of organizational documents, law or
certain material agreements as a result of the contemplated transaction o
capitalization o information provided by it for inclusion in this joint
proxy statement/prospectus o financial statements o finders' or advisors'
fees o absence of certain material changes since a specified balance
sheet date o absence of undisclosed material liabilities o litigation o
tax matters o employee benefits matters and o compliance with laws.
In addition, Frontier represents and warrants to Qwest as to certain
other matters, including the inapplicability of Frontier's shareholder rights
plan to the merger.
The representations and warranties in the merger agreement do not survive
the closing or termination of the merger agreement.
Conditions to the Completion of the Merger
Mutual Closing Conditions. The obligations of Qwest and Frontier to
complete the merger are subject to the satisfaction or, to the extent legally
permissible, waiver of the following conditions:
o approval by the Qwest and Frontier shareholders;
I-57
<PAGE>
Chapter One - The Merger
o expiration of the HSR Act waiting period;
o absence of legal prohibition on completion of the merger;
o Qwest's registration statement on Form S-4, which includes this joint
proxy statement/prospectus, being effective and not subject to any
stop order by the SEC;
o approval for the listing on the NASDAQ National Market of the shares
of Qwest common stock to be issued in the merger;
o receipt of all necessary approvals from and the avoidance of any
imposed conditions by the FCC and PUC's, except to the extent as
would not reasonably be expected to have a material adverse effect on
Qwest;
o receipt by Qwest and Frontier of opinions from their respective
counsel that the merger will qualify as a tax-free reorganization;
o accuracy as of closing of the representations and warranties made by
the other party to the extent specified in the merger agreement;
o performance in all material respects by the other party of the
obligations required to be performed by it at or prior to closing;
and
o redemption by Frontier of all of its outstanding preferred stock.
Termination of the Merger Agreement
Right to Terminate. The merger agreement may be terminated at any time
prior to the closing in any of the following ways:
(a) The merger agreement may be terminated by mutual written consent of
Qwest and Frontier.
(b) The merger agreement may be terminated by either Qwest or Frontier
if:
o the merger has not been completed by ______, ____. However, the
merger agreement may not be terminated for this reason by either
Qwest or Frontier if such party's failure to fulfill in any
material respect its obligations under the merger agreement has
resulted in the failure to complete the merger;
o Quest or U S WEST shareholders fail to give the necessary approval
at a duly held meeting; or
o there is a permanent legal prohibition to closing the merger.
However, the merger agreement may not be terminated for this reason
by either Qwest or Frontier if such party's failure to fulfill in
any material respect its obligations under the merger agreement has
to any extent been the cause of such legal prohibition.
(c) The merger agreement may be terminated by Qwest if the Frontier
Board fails to recommend the merger or withdraws or modifies in a manner
adverse to Qwest its approval or recommendation of the merger.
I-58
<PAGE>
Chapter One - The Merger
(d) The merger agreement may be terminated by Frontier at any time prior
to its shareholders meeting and upon three business days' notice to
Qwest, if the Frontier Board approves a superior proposal after:
o compliance by the Frontier Board with the requirements associated
with the receipt of such a superior proposal as provided in the
merger agreement;
o having concluded in good faith on the basis of its financial
advisors and outside counsel, after mandatory negotiations with
Qwest to make such adjustments as would enable Frontier and Qwest
to proceed with the merger, that such alternative proposal remains
a superior proposal; and
o Frontier has paid Qwest the cash termination fee described under
"--Termination Fees Payable by Frontier" below.
If the merger agreement is validly terminated, the agreement will become
void without any liability on the part of any party unless such party is in
willful breach thereof. However, the provisions of the merger agreement
relating to expenses and termination fees, as well as the confidentiality
agreement and the stock option agreement entered into between Qwest and
Frontier, will continue in effect notwithstanding termination of the merger
agreement.
Termination Fees Payable by Frontier. Frontier has agreed to pay Qwest a
cash amount equal to $270 million in any of the following circumstances:
o Frontier terminates the merger agreement as described in paragraph
(d) under "--Right to Terminate" above;
o Qwest terminates the merger agreement as described in paragraph (c)
under "--Right to Terminate" above;
o either Qwest or Frontier terminates the merger agreement in
circumstances where the following three conditions are met:
o Frontier's shareholders do not vote in favor of the merger,
o a third party has made a proposal for an alternative transaction, and
o within twelve months of the termination of the merger agreement,
Frontier enters into an agreement for an alternative transaction, or
consummates an alternative transaction, with any other third party;
o Qwest terminates the merger agreement because the merger was not
consummated by the termination date or either Qwest or Frontier
terminates the merger agreement because of the existence of a legal
prohibition and the following three conditions are met:
o at any time after the date of the merger agreement and at or before
the time of the event giving rise to the termination there exists a
proposal for an alternative transaction with respect to Frontier,
o following the existence of such alternative transaction proposal,
Frontier intentionally breaches any of its material covenants or
agreements in any material respect, and
I-59
<PAGE>
Chapter One - The Merger
o within twelve months of the termination of the merger agreement,
Frontier enters into an agreement for an alternative transaction, or
consummates an alternative transaction, with any other third party.
Other Expenses
Except as described in the merger agreement and subject to an exception
relating to the payment of transfer taxes, all costs and expenses incurred in
connection with the merger agreement and related transactions will be paid by
the party incurring such costs or expenses. Certain expenses incurred in
connection with the filing, printing and mailing of the joint proxy
statement/prospectus will be shared equally by Qwest and Frontier.
Amendments; Waivers
Any provision of the merger agreement may be amended or waived prior to
closing if the amendment or waiver is in writing and signed, in the case of an
amendment, by the respective Boards of each of the parties or, in the case of
a waiver, by the party against whom the waiver is to be effective. After the
approval of the merger agreement by the shareholders of Qwest and Frontier, no
amendment or waiver that by law requires further approval by shareholders may
be made without the further approval of such shareholders.
I-60
<PAGE>
Chapter One - The Merger
FRONTIER STOCK OPTION AGREEMENT
[To come.]
I-61
<PAGE>
Chapter One - The Merger
VOTING AGREEMENTS
[To come.]
I-62
<PAGE>
CHAPTER TWO
INFORMATION ABOUT THE MEETINGS AND VOTING
SEE CAUTIONARY NOTE ON COVER PAGE
The Qwest Board is using this joint proxy statement/prospectus to solicit
proxies from the holders of Qwest common stock for use at the Qwest meeting.
The U S WEST Board is also using this document to solicit proxies from the
holders of U S WEST common stock for use at the U S WEST meeting. The Frontier
Board is also using this document to solicit proxies from the holders of
Frontier common stock for use at the Frontier meeting. We are first mailing
this joint proxy statement/prospectus and accompanying form of proxy to Qwest,
U S WEST and Frontier shareholders on or about [________], 1999.
Matters Relating to the Meetings
<TABLE>
.....................................................................................................................
Qwest Meeting U S WEST Meeting Frontier Meeting
.....................................................................................................................
<S> <C> <C> <C>
Time and Place: [________], 1999 [________], 1999 [________], 1999
____________________________ ____________________________ ____________________________
____________________________ ____________________________ ____________________________
____________________________ ____________________________ ____________________________
____________________________ ____________________________ ____________________________
.....................................................................................................................
Purpose of 1. the proposal to issue 1. the proposal to approve 1. the proposal to approve
Meeting is to Vote Qwest common stock in and adopt the U S and adopt the Frontier
on the Following the U S WEST merger WEST merger merger agreement and
Items and the Frontier merger agreement and the U S the Frontier merger
WEST merger
2. the proposal to amend 2. such other matters as 2. such other matters as
the Qwest charter to may properly come may properly come
increase the number of before the U S WEST before the Frontier
authorized shares of meeting, including the meeting, including the
Qwest common stock approval of any approval of any
that may be issued adjournment of the adjournment of the
meeting meeting
3. such other matters as may
properly come before the
Qwest meeting, including
the approval of any
adjournment of the meeting
.....................................................................................................................
Record Date: The record date for shares The record date for shares The record date for shares
entitled to vote is [_______], entitled to vote is [_______], entitled to vote is [_______],
1999. 1999. 1999.
.....................................................................................................................
Outstanding As of ______________, there As of ______________, there As of ______________, there
Shares Held on were approximately were ___________ shares of were ___________ shares of
Record Date: ___________ shares of U S WEST common stock. Frontier common stock.
Qwest common stock.
.....................................................................................................................
</TABLE>
II-1
<PAGE>
Chapter Two - Information about the Meetings and Voting
<TABLE>
.....................................................................................................................
Qwest Meeting U S WEST Meeting Frontier Meeting
.....................................................................................................................
<S> <C> <C> <C>
Shares Entitled to Shares entitled to vote are Shares entitled to vote are Shares entitled to vote are
Vote: Qwest common stock held at U S WEST common stock Frontier common stock held
the close of business on the held at the close of business at the close of business on the
record date, ________, 1999. on the record date, ________, record date, _________,
1999. 1999.
Each share of Qwest common Each share of U S WEST Each share of Frontier
stock that you own entitles common stock that you own common stock that you own
you to one vote. entitles you to one vote. entitles you to one vote.
Shares held by Qwest in its Shares held by U S WEST in Shares held by Frontier in its
treasury are not voted. its treasury are not voted. treasury are not voted.
.....................................................................................................................
Quorum A quorum of shareholders is A quorum of shareholders is A quorum of shareholders is
Requirement: necessary to hold a valid necessary to hold a valid necessary to hold a valid
meeting. meeting. meeting.
The presence in person or by The presence in person or by The presence in person or by
proxy at the meeting of proxy at the meeting of proxy at the meeting of
holders of a majority of the holders of a majority of the holders of a majority of the
shares of Qwest common shares of U S WEST common shares of Frontier common
stock entitled to vote at the stock entitled to vote at the stock entitled to vote at the
meeting is a quorum. meeting is a quorum. meeting is a quorum.
Abstentions and broker "non- Abstentions and broker "non- Abstentions and broker "non-
votes" count as present for votes" count as present for votes" count as present for
establishing a quorum. establishing a quorum. establishing a quorum.
Shares held by Qwest in its Shares held by U S WEST in Shares held by Frontier in its
treasury do not count toward its treasury do not count treasury do not count toward
a quorum. toward a quorum. a quorum.
A broker non-vote occurs on A broker non-vote occurs on A broker non-vote occurs on
an item when a broker is not an item when a broker is not an item when a broker is not
permitted to vote on that item permitted to vote on that item permitted to vote on that item
without instruction from the without instruction from the without instruction from the
beneficial owner of the shares beneficial owner of the shares beneficial owner of the shares
and no instruction is given. and no instruction is given. and no instruction is given.
.....................................................................................................................
Shares [__________] shares of [__________] shares of [_______] shares of Frontier
Beneficially Qwest common stock, U S WEST common stock, common stock, including
Owned by Qwest, including exercisable options. including exercisable options. exercisable options. These
U S WEST and These shares represent in total These shares represent in total shares represent in total
Frontier approximately [___]% of the approximately [___]% of the approximately [__]% of the
Directors and outstanding shares of Qwest outstanding shares of U S outstanding shares of Frontier
Executive Officers common stock. WEST common stock. common stock.
as of
April 30, 1999:
.....................................................................................................................
</TABLE>
II-2
<PAGE>
Chapter Two - Information about the Meetings and Voting
Vote Necessary to Approve Qwest, U S WEST and Frontier Proposals
................................................................................
Item Vote Necessary*
................................................................................
Merger Proposals Qwest: Approval of the Qwest merger proposals
requires the affirmative vote of at least
a majority of the votes cast by the
holders of Qwest common stock.
Abstentions have no effect on the vote.
Approval of the Qwest charter amendment
proposal requires the affirmative vote of
at least a majority of the outstanding
shares of Qwest common stock. Abstentions
have the same effect as a vote against.
U S WEST: Approval of the U S WEST merger proposal
requires the affirmative vote of at least a
majority of the outstanding shares of U S
WEST common stock. Abstentions have the
same effect as a vote against.
Frontier: Approval of the Frontier merger proposal
requires the affirmative vote of at least
two-thirds of the outstanding shares of
Frontier common stock. Abstentions have
the same effect as a vote against.
................................................................................
- -------------------
* Under New York Stock Exchange rules, if your broker holds your shares in
its name, your broker may not vote your shares absent instructions from
you. Without your voting instructions, a broker non-vote will occur and
will (1) have no effect on the vote in the case of the Qwest merger
proposals and (2) have the effect of a vote against in the case of the
Qwest charter amendment proposal, the U S WEST merger proposal and the
Frontier merger proposal.
Proxies
Voting Your Proxy. You may vote in person at your meeting or by proxy. We
recommend you vote by proxy even if you plan to attend your meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give your
proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the merger proposals or abstain from voting.
How to Vote by Proxy
<TABLE>
.....................................................................................................................
Qwest U S WEST Frontier
.....................................................................................................................
<S> <C> <C> <C>
By Telephone*: Call toll-free 1-___-___-____ Call toll-free 1-___-___-____ Call toll-free 1-___-___-____
and follow the instructions. and follow the instructions. and follow the instructions.
You will need to give the You will need to give the You will need to give the
personal identification number personal identification number personal identification number
contained on your proxy card. contained on your proxy card. contained on your proxy card.
.....................................................................................................................
By Internet*: Go to www.__________.com Go to www.__________.com Go to www.___________.com
and follow the instructions. and follow the instructions. and follow the instructions.
You will need to give the You will need to give the You will need to give the
personal identification number personal identification number personal identification number
contained on your proxy card. contained on your proxy card. contained on your proxy card.
.....................................................................................................................
In Writing: Complete, sign, date and Complete, sign, date and Complete, sign, date and
return your proxy card in the return your proxy card in the return your proxy card in the
enclosed envelope. enclosed envelope. enclosed envelope.
.....................................................................................................................
</TABLE>
II-3
<PAGE>
Chapter Two - Information about the Meetings and Voting
* If you hold shares through a broker or other custodian, please check the
voting form used by that firm to see if it offers telephone or internet
voting.
Proxies for Participants in Qwest Plans. [To Come]
Proxies for Participants in US WEST Plans. [To Come]
Proxies for Participants in Frontier Plans [To Come]
If you submit your proxy but do not make specific choices, your proxy
will follow the Board's recommendations and vote your shares:
<TABLE>
Qwest U S WEST Frontier
..............................................................................................................
<S> <C> <C>
o "FOR" the Qwest merger o "FOR" the U S WEST merger o "FOR" the Frontier merger
proposals proposal proposal
o "FOR" the Qwest charter o "FOR" any proposal by the o "FOR" any proposal by the
amendment proposal U S WEST Board to adjourn Frontier Board to adjourn the
o "FOR" any proposal by the the U S WEST meeting Frontier meeting
Qwest Board to adjourn the o In its discretion as to any other o In its discretion as to any other
Qwest meeting business as may properly come business as may properly come
o In its discretion as to any other before the U S WEST meeting before the Frontier meeting
business as may properly come
before the Qwest meeting
</TABLE>
Revoking Your Proxy. You may revoke your proxy before it is voted by:
o submitting a new proxy with a later date, including a proxy given by
telephone or internet,
o notifying your company's Secretary in writing before the meeting that
you have revoked your proxy, or
o voting in person at the meeting.
Voting in person. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring an
account statement or letter from the nominee indicating that you are the
beneficial owner of the shares on _________, ____, the record date for voting.
People with disabilities. We can provide reasonable assistance to help
you participate in the meeting if you tell us about your disability and your
plan to attend. Please call or write the Secretary of your company at least
two weeks before your meeting at the number or address under "The Companies"
on page I-2.
Confidential voting. Independent inspectors count the votes. Your
individual vote is kept confidential from us unless special circumstances
exist. For example, a copy of your proxy card will be sent to us if you write
comments on the card.
Proxy solicitation. We will pay our own costs of soliciting proxies.
In addition to this mailing, Qwest, U S WEST and Frontier employees may
solicit proxies personally, electronically or by telephone. Qwest is paying
[_________________] a fee of $[_______] plus expenses to help with the
solicitation. U S WEST is paying [_______________] a fee of $[_______] plus
expenses to help with the solicitation. Frontier is paying [_______________] a
fee of $[_______] plus expenses to help with the solicitation.
II-4
<PAGE>
Chapter Two - Information about the Meetings and Voting
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy by mail, telephone or internet without delay. We also reimburse
brokers and other nominees for their expenses in sending these materials to
you and getting your voting instructions.
Do not send in any stock certificates with your proxy cards. The exchange
agent will mail transmittal forms with instructions for the surrender of stock
certificates for U S WEST and Frontier common stock to former U S WEST and
Frontier shareholders as soon as practicable after the completion of the
applicable merger.
Other Business; Adjournments
We are not currently aware of any other business to be acted upon at
either meeting. If, however, other matters are properly brought before either
meeting, or any adjourned meeting, your proxies will have discretion to vote
or act on those matters according to their best judgment, including to adjourn
the meeting.
Adjournments may be made for the purpose of, among other things,
soliciting additional proxies. Any adjournment may be made from time to time
by approval of the holders of shares representing a majority of the votes
present in person or by proxy at the meeting, whether or not a quorum exists,
without further notice other than by an announcement made at the meeting. None
of us currently intends to seek an adjournment of our meeting.
II-5
<PAGE>
CHAPTER THREE
CERTAIN LEGAL INFORMATION
SEE CAUTIONARY NOTE ON COVER PAGE
COMPARISON OF QWEST-U S WEST SHAREHOLDER RIGHTS
The rights of U S WEST shareholders under Delaware law, the U S WEST
charter and the U S WEST by-laws prior to the U S WEST merger are
substantially the same as the rights Qwest shareholders will have following
the U S WEST merger under Delaware law, the Qwest charter and the Qwest
by-laws, with certain principal exceptions summarized in the chart below.
Copies of the U S WEST charter, the U S WEST by-laws, the Qwest charter and
the Qwest by-laws are incorporated by reference and will be sent to holders of
shares of U S WEST common stock upon request. See "Where You Can Find More
Information". The summary contained in the following chart is not intended to
be complete and is qualified by reference to Delaware law, the U S WEST
charter, the U S WEST by-laws, the Qwest charter and the Qwest by-laws.
Summary of Material Differences Between Current Rights of
U S WEST Shareholders and Rights Those Shareholders Will
Have as Qwest Shareholders Following the U S WEST Merger
<TABLE>
.............................................................................................................................
Qwest
U S WEST Shareholder Rights Shareholder Rights
.............................................................................................................................
<S> <C> <C>
Corporate Upon completion of the U S WEST merger, Upon completion of the U S WEST
Governance: the rights of U S WEST shareholders who merger, the rights of Qwest shareholders
become Qwest shareholders in the U S WEST will be governed by Delaware law, the
merger will be governed by Delaware law, Qwest charter and the Qwest by-laws. The
the Qwest charter and the Qwest by-laws. charter and by-laws of Qwest after the U S
The charter and by-laws of Qwest after the WEST merger will be identical in all
U S WEST merger will be identical in all respects to those of Qwest prior to the U S
respects to those of Qwest prior to the U S WEST merger after giving effect to the
WEST merger after giving effect to the Qwest charter amendment adopted at the
Qwest charter amendment adopted at the Qwest meeting.
Qwest meeting.
.............................................................................................................................
Authorized The authorized capital stock of U S WEST The authorized capital stock of Qwest is as
Capital Stock: consists of 2 billion shares of common stock set forth under "Description of Qwest
and 200 million shares of preferred stock. Capital Stock--Authorized Capital Stock"
below.
.............................................................................................................................
Number of The U S WEST Board currently consists of The Qwest Board currently consists of 12
Directors: 11 directors. directors.
If the U S WEST merger is completed, the
size of the Qwest Board will be increased
from 12 to [__].
.............................................................................................................................
Classification of The U S WEST Board is divided into three Qwest does not have a classified board.
Board of classes as nearly equal in number as possible, The Qwest by-laws require that all
Directors: with each class serving a staggered three-year directors be elected at each annual meeting
term. of shareholders for a term of one year.
.............................................................................................................................
</TABLE>
III-1
<PAGE>
Chapter Three - Certain Legal Information
<TABLE>
.............................................................................................................................
Qwest
U S WEST Shareholder Rights Shareholder Rights
.............................................................................................................................
<S> <C> <C>
Removal of U S WEST directors may be removed from Qwest directors may be removed from
Directors: office only with cause (as defined below) and office with or without cause by the
only then by the affirmative vote of the affirmative vote of holders of at least a
holders of at least 80% of the shares of U S majority of the shares of Qwest common
WEST common stock. "Cause" means the stock.
willful and continuous failure of a director to
substantially perform duties to U S WEST or
the willful engaging in gross misconduct
materially and demonstrably injurious to U S
WEST.
.............................................................................................................................
Shareholder U S WEST shareholders may not act by Qwest shareholders may act by written
Action by Written written consent in lieu of a meeting of consent in lieu of a meeting of
Consent: shareholders. shareholders.
.............................................................................................................................
Calling of Special The U S WEST charter provides that the U S The Qwest by-laws provide that the Qwest
Meetings of WEST Board and the Chairman of the U S Board, the Chairman of the Qwest Board
Shareholders: WEST Board may each call a special meeting and holders of at least 25% of the shares of
of U S WEST shareholders. Qwest common stock may each call a
special meeting of Qwest shareholders.
.............................................................................................................................
Amendment of The U S WEST by-laws may be amended by The Qwest by-laws may be amended by the
Charter and the affirmative vote of at least 66(2)/(3) of the affirmative vote of at least a majority of the
By-laws: U S WEST directors then in office. The U S Qwest directors then in office. The Qwest
WEST by-laws may also be amended by the by-laws may also be amended by the
affirmative vote of the holders of at least 80% affirmative vote of a majority of the votes
of the shares of U S WEST common stock. cast by the holders of Qwest common
stock.
The U S WEST charter generally may be
amended by the affirmative vote of the The Qwest charter may be amended by the
holders of at least a majority of the shares of affirmative vote of the majority of the votes
U S WEST common stock. cast by the holders of Qwest common
stock.
However, amendments of the U S WEST
charter relating to (i) classification of the U S
WEST Board, (ii) removal of U S WEST
directors, (iii) shareholder actions and
meetings and (iv) amendments of the U S
WEST charter and by-laws require the
affirmative vote of the holders of at least 80%
of the shares of U S WEST common stock.
.............................................................................................................................
Shareholder U S WEST has entered into a Rights Qwest does not have a shareholder rights
Rights Plan: Agreement, dated as of June 1, 1998, between plan. While Qwest has no present intention
U S WEST and State Street Bank and Trust to adopt a shareholder rights plan, the
Company, as Rights Agent, as amended, Qwest Board, pursuant to its authority to
pursuant to which U S WEST has issued issue preferred stock, could do so without
rights, exercisable only upon the occurrence shareholder approval at any future time.
of certain events, to purchase its Series A See "Description of Qwest Capital
Junior Participating Preferred Stock. Stock--Qwest Preferred Stock--Blank
Check Preferred Stock".
.............................................................................................................................
</TABLE>
III-2
<PAGE>
Chapter Three - Certain Legal Information
SEE CAUTIONARY NOTE ON COVER PAGE
COMPARISON OF QWEST-FRONTIER SHAREHOLDER RIGHTS
The rights of Frontier shareholders under New York law, the Frontier
charter and the Frontier by-laws prior to the Frontier merger are
substantially the same as the rights Qwest shareholders will have following
the Frontier merger under Delaware law, the Qwest charter and the Qwest
by-laws, with certain principal exceptions summarized in the chart below.
Copies of the Frontier charter, the Frontier by-laws, the Qwest charter and
the Qwest by-laws are incorporated by reference and will be sent to holders of
shares of Frontier common stock upon request. See "Where You Can Find More
Information". The summary contained in the following chart is not intended to
be complete and is qualified by reference to New York law, Delaware law, the
Frontier charter, the Frontier by-laws, the Qwest charter and the Qwest
by-laws.
Summary of Material Differences Between Current Rights of
Frontier Shareholders and Rights Those Shareholders Will
Have as Qwest Shareholders Following the Frontier Merger
<TABLE>
.............................................................................................................................
Frontier Shareholder Rights Qwest Shareholder Rights
.............................................................................................................................
<S> <C> <C>
Corporate Upon completion of the Frontier merger, the Upon completion of the Frontier merger,
Governance: rights of Frontier shareholders who become the rights of Qwest shareholders will be
Qwest shareholders in the Frontier merger governed by Delaware law, the Qwest
will be governed by Delaware law, the Qwest charter and the Qwest by-laws. The charter
charter and the Qwest by-laws. The charter and by-laws of Qwest after the Frontier
and by-laws of Qwest after the Frontier merger will be identical in all respects to
merger will be identical in all respects to those of Qwest prior to the Frontier merger
those of Qwest prior to the Frontier merger after giving effect to the Qwest charter
after giving effect to the Qwest charter amendment adopted at the Qwest meeting.
amendment adopted at the Qwest meeting.
.............................................................................................................................
Authorized The authorized capital stock of Frontier The authorized capital stock of Qwest is as
Capital Stock: consists of 300 million shares of common set forth under "Description of Qwest
stock, 4 million shares of Class A Preferred Capital Stock--Authorized Capital Stock"
Stock and 850,000 shares of Cumulative below.
Preferred Stock.
.............................................................................................................................
Number of The Frontier Board currently consists of 12 The Qwest Board currently consists of 12
Directors: directors. directors.
If the U S WEST merger is completed, the
size of the Qwest Board will be increased
from 12 to [__].
.............................................................................................................................
Removal of Frontier directors may be removed from Qwest directors may be removed from
Directors: office only for cause. office with or without cause.
.............................................................................................................................
Shareholder Frontier shareholders may not act by written Qwest shareholders may act by written
Action by Written consent in lieu of a meeting of shareholders consent in lieu of a meeting of
Consent: unless the written consent is signed by all shareholders.
holders of Frontier voting stock.
.............................................................................................................................
Calling of Special The Frontier charter provides that the Frontier The Qwest by-laws provide that the
Meetings of Board may call a special meeting of Frontier Chairman of the Qwest Board, the Qwest
Shareholders: shareholders. Board and holders of 25% of Qwest's
voting stock may each call a special
meeting of Qwest shareholders.
.............................................................................................................................
</TABLE>
III-3
<PAGE>
Chapter Three - Certain Legal Information
<TABLE>
.............................................................................................................................
Frontier Shareholder Rights Qwest Shareholder Rights
.............................................................................................................................
<S> <C> <C>
Approval of A merger of Frontier with another A merger of Qwest with another
Mergers: corporation would generally require the corporation would generally require the
approval of holders of at least two-thirds of approval of holders of at least a majority of
the outstanding shares of Frontier common the outstanding shares of Qwest common
stock. stock.
.............................................................................................................................
Shareholder Frontier has entered into a Rights Agreement, Qwest does not have a shareholder rights
Rights Plan: dated as of April 9, 1995, between Frontier plan. While Qwest has no present intention
and The First National Bank of Boston, as to adopt a shareholder rights plan, the
Rights Agent, as amended, pursuant to which Qwest Board, pursuant to its authority to
Frontier has issued rights, exercisable only issue preferred stock, could do so without
upon the occurrence of certain events, to shareholder approval at any future time.
purchase its Series A Junior Participating See "Description of Qwest Capital
Preferred Stock. Stock--Qwest Preferred Stock--Blank
Check Preferred Stock".
.............................................................................................................................
</TABLE>
III-4
<PAGE>
Chapter Three - Certain Legal Information
SEE CAUTIONARY NOTE ON COVER PAGE
DESCRIPTION OF QWEST CAPITAL STOCK
The following summary of the terms of the capital stock of Qwest prior
to, and after completion of, the mergers is not meant to be complete and is
qualified by reference to the Qwest charter and Qwest by-laws. Copies of the
Qwest charter and Qwest by-laws are incorporated by reference and will be sent
to holders of shares of Qwest common stock, U S WEST common stock and Frontier
common stock upon request. See "Where You Can Find More Information".
Authorized Capital Stock
Prior to Completion of the Mergers. Under the Qwest charter, Qwest's
authorized capital stock consists of 2.0 billion shares of Qwest common stock,
$.01 par value, and 25 million shares of preferred stock, $.01 par value.
Following Completion of the Mergers. If the Qwest charter amendment
proposal is approved, the Qwest charter will be amended to increase the
authorized number of shares of Qwest common stock to ___ billion.
Qwest Common Stock
Qwest Common Stock Outstanding. The outstanding shares of Qwest common
stock are, and the shares of Qwest common stock issued pursuant to the mergers
will be, duly authorized, validly issued, fully paid and nonassessable.
Voting Rights. Each holder of Qwest common stock is entitled to one vote
for each share of Qwest common stock held of record on the applicable record
date on all matters submitted to a vote of shareholders.
Dividend Rights; Rights upon Liquidation. The holders of Qwest common
stock are entitled to receive, from funds legally available for the payment
thereof, dividends when and as declared by resolution of the Qwest Board,
subject to any preferential dividend rights granted to the holders of any
outstanding Qwest preferred stock. In the event of liquidation, each share of
Qwest common stock is entitled to share pro rata in any distribution of
Qwest's assets after payment or providing for the payment of liabilities and
the liquidation preference of any outstanding Qwest preferred stock.
Preemptive Rights. Holders of Qwest common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or
treasury shares or other securities.
Qwest Preferred Stock
Qwest Preferred Stock Outstanding. As of [______], 1999, no shares of Qwest
preferred stock were issued and outstanding.
Blank Check Preferred Stock. Under the Qwest charter, the Qwest Board has
the authority, without shareholder approval, to create one or more classes or
series within a class of preferred stock, to issue shares of preferred stock
in such class or series up to the maximum number of shares of the relevant
class or series of preferred stock authorized, and to determine the
preferences, rights, privileges and restrictions of any such class or series,
including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series. Acting under this authority, the Qwest Board could
create and issue a class or series of preferred stock with rights, privileges
or restrictions, and adopt a shareholder rights plan, having the effect of
III-5
<PAGE>
Chapter Three - Certain Legal Information
discriminating against an existing or prospective holder of securities as a
result of such shareholder beneficially owning or commencing a tender offer
for a substantial amount of Qwest common stock. One of the effects of
authorized but unissued and unreserved shares of capital stock may be to
render more difficult or discourage an attempt by a potential acquiror to
obtain control of Qwest by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of Qwest's management. The
issuance of such shares of capital stock may have the effect of delaying,
deferring or preventing a change in control of Qwest without any further
action by the shareholders of Qwest. Qwest has no present intention to adopt a
shareholder rights plan, but could do so without shareholder approval at any
future time.
Amendment of the Qwest Charter
At the Qwest meeting, holders of Qwest common stock will be asked to
approve the amendment of the Qwest charter. The amendment will increase the
number of authorized shares of Qwest common stock to [ ] billion. Approval of
the merger proposals is conditioned on approval of the Qwest charter amendment
proposal. However, approval of the Qwest charter amendment proposal is not
conditioned on approval of the merger proposals.
Increase of Authorized Common Stock. Qwest's charter currently authorizes
2.0 billion shares of common stock and 25 million shares of preferred stock.
On ________, 1999, _____________ shares of Qwest common stock were issued and
outstanding.
To complete the U S WEST merger, Qwest expects that approximately ___
billion shares of Qwest common stock will be required to be issued to holders
of U S WEST common stock and that approximately ___ million shares of Qwest
common stock will be required to be reserved for issuance under U S WEST
employee stock options and other stock-based awards.
To complete the Frontier merger, Qwest expects that approximately ___
billion shares of Qwest common stock will be required to be issued to holders
of Frontier common stock and that approximately ____ million shares of Qwest
common stock will be required to be reserved for issuance under Frontier
employee stock options and other stock-based awards.
As these numbers show, the 2.0 billion shares of common stock currently
authorized under the Qwest charter will not be sufficient to complete the
mergers. We therefore ask Qwest shareholders to approve the amendment, which
will change Article FOURTH of the Qwest charter to increase the number of
authorized shares of Qwest common stock from 2.0 billion to ___ billion.
The increased number of authorized shares will give Qwest sufficient
shares to complete the mergers. At present, Qwest has no plans to issue shares
of Qwest common stock for any other purpose. However, we believe it is
desirable to have additional shares available for other corporate purposes
that might arise in the future. For example, although Qwest currently meets
its obligations to deliver shares under employee stock options and similar
arrangements with treasury shares (meaning previously issued shares that have
been reacquired by Qwest), it may become desirable in the future to use newly
issued shares for this purpose. Shares could also be used for acquisitions or
to raise capital. Under some circumstances, it is also possible for a company
to use unissued shares for antitakeover purposes, but Qwest has no present
intention to take any such action.
Whether or not any future issuance of shares unrelated to the mergers
would be submitted for a shareholder vote depends upon the nature of the
issuance, legal and stock exchange requirements, and the judgment of the Qwest
Board at the time.
III-6
<PAGE>
Chapter Three - Certain Legal Information
Transfer Agent and Registrar
ChaseMellon Shareholder Services LLC is the transfer agent and registrar
for the Qwest common stock.
Stock Exchange Listing; Delisting and Deregistration of U S WEST and Frontier
Common Stock
It is a condition to the U S WEST merger that the shares of Qwest common
stock issuable in the U S WEST merger be approved for quotation on the Nasdaq,
subject to official notice of issuance. If the U S WEST merger is completed, U
S WEST common stock will cease to be listed on the New York Stock Exchange.
It is a condition to the Frontier merger that the shares of Qwest common
stock issuable in the Frontier merger be approved for quotation on the Nasdaq,
subject to official notice of issuance. If the Frontier merger is completed,
Frontier common stock will cease to be listed on the New York Stock Exchange.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains or incorporates by reference
"forward-looking statements" as that term is used in federal securities laws
about our financial condition, results of operations and business. These
statements include, among others:
o statements concerning the benefits that Qwest expects will result from
its business activities and certain transactions Qwest has completed,
such as increased revenues, decreased expenses and avoided expenses and
expenditures,
o Qwest's plans to complete its communications network, and
o other statements of Qwest's expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not
historical facts.
These statements may be made expressly in this document, or may be
incorporated by reference to other documents Qwest has filed with the SEC. You
can find many of these statements by looking for words such as "believes,"
"expects," "anticipates," "estimates," or similar expressions used in this
report or incorporated by reference in this report.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties that may cause Qwest's actual results to be materially
different from any future results expressed or implied by Qwest in those
statements. The risks and uncertainties include those risks, uncertainties and
risk factors identified, among other places, under "Risk Factors" in this
document, and under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Annual Report on Form 10-K for the
year ended December 31, 1998.
The most important facts that could prevent Qwest from achieving its
stated goals include, but are not limited to, the following:
o Qwest's failure to construct its communications network on schedule and
on budget;
o operating and financial risks related to managing rapid growth,
integrating acquired businesses and sustaining operating cash flow to
meet Qwest's debt service requirements, make capital expenditures and
fund operations;
o potential fluctuation in quarterly results;
III-7
<PAGE>
Chapter Three - Certain Legal Information
o volatility of stock price;
o intense competition in the communications services market;
o dependence on new product development;
o Qwest's ability to achieve year 2000 compliance;
o rapid and significant changes in technology and markets;
o adverse changes in the regulatory or legislative environment affecting
Qwest's business; and
o failure to maintain necessary rights of way.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. Qwest cautions you not to place undue reliance on
the statements, which speak only as of the date of this report or, in the case
of documents incorporated by reference, the date of the document.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral
forward-looking statements that Qwest or persons acting on its behalf may
issue. Qwest undertakes no obligations to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
of this report or to reflect the occurrence of unanticipated events.
LEGAL MATTERS
The validity of the Qwest common stock to be issued to U S WEST and
Frontier shareholders in the mergers will be passed upon by counsel to Qwest.
It is a condition to the completion of the U S WEST merger that Qwest and U S
WEST receive an opinion from their counsel with respect to the tax treatment
of the U S WEST merger. It is a condition to the completion of the Frontier
merger that Qwest and Frontier receive an opinion from their counsel with
respect to the tax treatment of the Frontier merger.
EXPERTS
The consolidated financial statements and schedule of Qwest and
subsidiaries as of December 31, 1998 and 1997 and for each of the years in the
three-year period ended December 31, 1998 have been incorporated in this
registration statement by reference in reliance on the report pertaining to
the consolidated financial statements, dated February 2, 1999, and the report
dated February 2, 1999 pertaining to the related financial statement schedule,
of KPMG LLP, independent certified public accountants, incorporated in this
registration statement by reference, and on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements and schedules of LCI International,
Inc. and subsidiaries as of December 31, 1997 and 1996 and for each of the
years in the three-year period ended December 31, 1997 incorporated by
reference in this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report dated
February 16, 1998 (except with respect to the matter discussed in Note 15, as
to which the date is March 16, 1998) with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
III-8
<PAGE>
Chapter Three - Certain Legal Information
The consolidated financial statements of Icon CMT Corp. as of December
31, 1996 and 1997 and for each of the three years in the period ended December
31, 1997, have been incorporated in this joint proxy statement/prospectus by
reference to the Registration Statement (No. 333-65095) on Form S-4 of Qwest,
dated September 30, 1998, as amended by Amendment No. 1 to the S-4, dated
December 10, 1998. Such financial statements, except as they relate to
Frontier Media Group, Inc. as of December 31, 1996 and 1997 and for each of
the two years in the period ended December 31, 1997, have been audited by
PricewaterhouseCoopers LLP, independent accountants, and insofar as they
relate to Frontier Media Group, Inc. as of December 31, 1996 and 1997 and for
each of the two years in the period ended December 31, 1997, by Ernst & Young
LLP, independent accountants.
[To come.]
III-9
<PAGE>
CHAPTER FOUR
ADDITIONAL INFORMATION FOR SHAREHOLDERS
SEE CAUTIONARY NOTE ON COVER PAGE
FUTURE SHAREHOLDER PROPOSALS
Qwest
Any shareholder proposal for Qwest's annual meeting in 2000 must be sent
to the Secretary of Qwest at the address of Qwest's principal executive office
given under "Summary--The Companies". The deadline for receipt of a proposal
to be considered for inclusion in Qwest's proxy statement is December 31,
1999. The deadline for notice of a proposal for which a shareholder will
conduct his or her own solicitation is January 6, 2000 (however, if the date
of the annual meeting is not within 30 days of May 5, 2000, then the deadline
for such notice becomes not less than 150 days prior to the date of the annual
meeting). On request, the Secretary of Qwest will provide detailed
instructions for submitting proposals.
U S WEST
U S WEST will hold an annual meeting in the year 2000 only if the U S
WEST merger has not already been completed. If such meeting is held,
shareholders' proposals will be eligible for consideration for inclusion in
the proxy statement for the 2000 annual meeting pursuant to Rule 14a-8 under
the Securities and Exchange Act of 1934, as amended, if such proposals are
received by U S WEST before the close of business on November 25, 1999.
Notices of shareholders' proposals submitted outside the processes of Rule
14a-8 will be considered timely, pursuant to the advance notice requirement
set forth in Article II, Section 7 of the U S WEST by-laws, if such notices
are delivered to or mailed and received by U S WEST by January 21, 2000. Any
such proposal or notice should be directed to the attention of the Secretary,
U S WEST, Inc., 1801 California Street, Denver, Colorado 80202.
Frontier
Frontier will hold an annual meeting in the year 2000 only if the
Frontier merger has not already been completed. If such meeting is held,
shareholders' proposals will be eligible for consideration for inclusion in
the proxy statement for the 2000 annual meeting pursuant to Rule 14a-8 under
the Securities and Exchange Act of 1934, as amended, if such proposals are
received by Frontier before the close of business on November 12, 1999.
Notices of shareholders' proposals submitted outside the processes of Rule
14a-8 will be considered timely, pursuant to the advance notice requirement
set forth in Article I, Section 12 of Frontier's by-laws, if such notices are
delivered to or mailed and received by Frontier during the period beginning
January 30, 2000 and ending on the close of business on February 29, 2000
(however, if the date of the annual meeting is earlier than March 30, 2000 or
later than June 28, 2000, then the deadline for such notice becomes not
earlier than 90 days prior to the date of the annual meeting and not later
than the later of 60 days prior to the annual meeting or 10 days following the
day on which public announcement of the date of the annual meeting is first
made). Any such proposal or notice should be directed to the attention of the
Corporate Secretary, Frontier Corporation, 180 South Clinton Avenue,
Rochester, New York 14646-0700.
SEC rules set forth standards for the exclusion of some shareholder
proposals from a proxy statement for an annual meeting.
IV-1
<PAGE>
Chapter Four - Additional Information for Shareholders
WHERE YOU CAN FIND MORE INFORMATION
Qwest, U S WEST and Frontier file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
Qwest filed a registration statement on Form S-4 to register with the SEC
the Qwest common stock to be issued to U S WEST shareholders in the U S WEST
merger and to Frontier shareholders in the Frontier merger. This joint proxy
statement/prospectus is a part of that registration statement and constitutes
a prospectus of Qwest in addition to being a proxy statement of Qwest, U S
WEST and Frontier for their respective meetings. As allowed by SEC rules, this
joint proxy statement/prospectus does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The SEC allows us to "incorporate by reference" information into this
joint proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of
this joint proxy statement/prospectus, except for any information superseded
by information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about our companies and
their finances.
<TABLE>
Qwest SEC Filings (File No. 000-22609) Period
.....................................................................................................................
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Reports on Form 8-K Filed on January 14, 1999, April 27, 1999,
April 28, 1999, June 14, 1999 and June 18,
1999
Amendment No. 1 to Registration Statement on Form S-4 (File Filed on December 10, 1998
No. 333-65095)
The description of Qwest common stock set forth in the Filed on May 28, 1997
Registration Statement on Form 8-A
U S WEST SEC Filings (File No. 1-14087) Period
.....................................................................................................................
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Reports on Form 8-K Filed on April 17, 1999, April 22, 1999, May
12, 1999, May 18, 1999, May 21, 1999 and
May 26, 1999
The description of U S WEST common stock set forth in the Filed on May 12, 1998
Registration Statement on Form 8-A
Frontier SEC Filings (File No. 1-4166) Period
.....................................................................................................................
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter Ended March 31, 1999
</TABLE>
IV-2
<PAGE>
Chapter Four - Additional Information for Shareholders
<TABLE>
<S> <C>
Current Reports on Form 8-K Filed on May 18, 1999
The description of Frontier common stock set forth in the Filed on ____________
Registration Statement on Form 8-A
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
date of the meetings.
Qwest has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Qwest[, U S WEST has
supplied all such information relating to U S WEST and Frontier has supplied
all such information relating to Frontier].
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
SEC. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference
an exhibit in this joint proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this joint proxy statement/prospectus
by requesting them in writing or by telephone from the appropriate party at
the following address:
Qwest Communications U S WEST, Inc. Frontier Corporation
International Inc. 1801 California Street 180 South Clinton Avenue
555 Seventeenth Street Denver, Colorado 80202 Rochester, New York 14646-0700
Denver, Colorado 80202 Tel: (303) 672-2700 Tel: (216) 777-1000
Tel: (303) 992-1400
If you would like to request documents from us, please do so by
__________, 1999 to receive them before the meetings.
You can also get more information by visiting Qwest's web site at
www.______.com, U S WEST's web site at www.______.com and Frontier's website
at www.______.com. Web site materials are not part of this joint proxy
statement/prospectus.
You should rely only on the information contained or incorporated by reference
in this joint proxy statement/prospectus to vote on the Qwest merger
proposals, the Qwest charter amendment proposal, the U S WEST merger proposal
and the Frontier merger proposal, as the case may be. We have not authorized
anyone to provide you with information that is different from what is
contained in this joint proxy statement/prospectus. This joint proxy
statement/prospectus is dated ________, 1999. You should not assume that the
information contained in the joint proxy statement/prospectus is accurate as
of any date other than such date, and neither the mailing of this joint proxy
statement/prospectus to shareholders nor the issuance of Qwest common stock in
the mergers shall create any implication to the contrary.
IV-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Indemnification under Qwest Charter and By-Laws and Delaware Law . Article
Seventh of the Qwest Communications International Inc. charter provides for the
indemnification of directors or officers, in accordance with the By-Laws, to
the fullest extent permitted by the General Corporation Law of the State of
Delaware. Article VI of the By-laws of Qwest provides that Qwest shall
indemnify to the fullest extent permitted by law any director or officer made
or threatened to be made a party to any legal action by reason of the fact that
such person is or was a director, officer, employee or other corporate agent of
Qwest or any subsidiary or constituent corporation or served any other
enterprise at the request of Qwest against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Qwest,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The General Corporation Law of the State
of Delaware provides for the indemnification of directors and officers under
certain conditions.
Qwest D&O Insurance. The directors and officers of Qwest are insured under
a policy of directors' and officers' liability insurance.
U S WEST Merger Agreement Provisions Relating To U S WEST and Qwest
Directors and Officers. The U S WEST merger agreement provides that for six
years after the closing, U S WEST and Qwest will maintain the current
provisions regarding indemnification of officers and directors contained in the
charter and bylaws of U S WEST and Qwest and will continue to honor any
directors, officers or employees indemnification agreements of U S WEST and
Qwest and their respective subsidiaries. U S WEST and Qwest shall also maintain
in effect the current policies of directors' and officers' liability insurance
and fiduciary liability insurance maintained by U S WEST and Qwest,
respectively (except that U S WEST may substitute policies which are, in the
aggregate, no less advantageous to the insured in any material respect) with
respect to claims arising from facts or events which occurred on or before the
consummation of the U S WEST merger. In addition, U S WEST and Qwest shall
indemnify the directors and officers of U S WEST and Qwest, respectively, to
the fullest extent to which U S WEST and Qwest are permitted to indemnify such
officers and directors under their respective charters and bylaws and
applicable law.
Frontier Merger Agreement Provisions Relating To Frontier Directors and
Officers. The Frontier merger agreement provides that for six years after the
closing, Qwest will maintain the current provisions regarding elimination of
liability of directors and indemnification of officers, directors and employees
contained in the certificate of incorporation and by-laws of Frontier and the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by Frontier (except that Qwest may substitute
policies which are, in the aggregate, no less advantageous to the insured) with
respect to claims arising from facts or events that occurred on or before the
consummation of the Frontier merger.
The Frontier merger agreement also provides that for a period of six years
after the closing, Qwest will provide directors' and officers' liability
insurance covering acts or omissions occurring prior to closing by each person
currently covered by Frontier's officers' and directors' liability insurance
policy. This insurance policy must be no less favorable than the Frontier
policy currently in effect , except that Qwest will only be obligated to pay up
to 200% of the annual premium currently paid by Frontier for such insurance.
S4-II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) List of Exhibits
<TABLE>
<S> <C>
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger dated as of June [__], 1999 among U S
WEST, Inc., Qwest Communications International Inc. and [Merger Sub]
(To Come).
2.2 Agreement and Plan of Merger dated as of June [__], 1999 among Qwest
Communications International Inc., [Merger Sub] and Frontier Corporation
(To Come).
3.1 Amended and Restated Certificate of Incorporation of Qwest (incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
3.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Qwest (incorporated herein by reference to Form S-3 (File
No. 333-58617)).
3.3 Amended and Restated Bylaws of Qwest (incorporated
herein by reference to Qwest's Form 10-K for the year
ended December 31, 1998 (File No.
000-22609)).
4.1(a) Indenture dated as of October 15, 1997 with Bankers Trust Company
relating to Qwest's 9.47% notes (incorporated herein by reference to Form
S-4 as declared effective on January 5, 1998 (File No. 333-42847)).
4.1(b) Indenture dated as of August 28, 1997 with Bankers Trust Company
relating to Qwest's 10 7/8% notes (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
4.1(c) Indenture dated as of January 29, 1998 with Bankers Trust Company
relating to Qwest's 8.29% notes (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
4.1(d) Indenture dated as of November 27, 1998 with Bankers Trust Company
relating to Qwest's 7.25% notes (incorporated herein by reference to the
exhibit of the same number in Form S-4 (File No. 333-71603)).
4.1(e) Indenture dated as of November 4, 1998 with Bankers Trust Company
relating to Qwest's 7.50% notes (incorporated herein by reference to the
exhibit of the same number in Form S-4 (File No. 333-71603)).
4.2(a) Registration Agreement dated November 4, 1998 with Salomon Brothers
Inc. relating to Qwest's 7.50% Senior Discount Notes Due 2008
(incorporated herein by reference to the exhibit of the same number in
Form S-4 (File No. 333-71603)).
S4-II-2
<PAGE>
4.2(b) Registration Agreement dated November 27, 1998 with Salomon Brothers
Inc. relating to Qwest's 7.25% Senior Discount Notes Due 2008
(incorporated herein by reference to the exhibit of the same number in
Form S-4 (File No. 333-71603)).
4.3 Indenture dated as of June 23, 1997 between LCI International, Inc., and
First Trust National Association, as trustee, Providing for the Issuance of
Senior Debt Securities, including Resolutions of the Pricing Committee of
the Board of Directors establishing the terms of the 7.25% Senior Notes
due June 15, 2007 (incorporated herein by reference to exhibit 4(c) in
LCI's Current Report on Form 8-K dated June 23, 1997).
4.4 Credit Agreement, dated as of March 31, 1999, among Qwest
Communications International Inc., as Borrower, NationsBank, N.A., as
Administrative Agent, and the Lenders party thereto (incorporated herein
by reference to Qwest's Form 10-Q for the quarter ended March 31, 1999
(File No. 000-22609)).
5 Opinion of counsel to Qwest regarding the validity of the securities being
registered (To Come).
8.1 Opinion of counsel to Qwest regarding material federal
income tax consequences relating to the mergers (To
Come).
8.2 Opinion of counsel to Qwest regarding the lack of effect of the U S WEST
merger on the tax-free qualification of the prior spin-off of U S WEST (To
Come).
8.3 Opinion of counsel to U S WEST regarding material
federal income tax consequences relating to the U S WEST
merger (To Come).
8.4 Opinion of counsel to U S WEST regarding the lack of effect of the U S
WEST merger on the tax-free qualification of the prior spin-off of U S
WEST (To Come).
8.5 Opinion of counsel to Frontier regarding material
federal income tax consequences relating to the Frontier
merger (To Come).
10.1 Voting Agreement dated as of June __, 1999 among U S WEST, Inc. and
Anschutz Company (To Come).
10.2 Voting Agreement dated as of June __, 1999 between Frontier Corporation
and Anschutz Company (To Come).
10.3 Stock Option Agreement dated as of June __, 1999 by and between
Frontier Corporation and Qwest Communications International Inc. (To
Come).
10.4 Growth Share Plan, as amended, effective October 1, 1996 (Incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
S4-II-3
<PAGE>
10.5 Equity Incentive Plan (Incorporated herein by reference to Form S-1 as
declared effective on June 23, 1997 (File No. 333-25391)).
10.6 Qwest Communications International Inc. Employee Stock Purchase Plan
(incorporated herein by reference to Qwest's Preliminary Proxy Statement
for the Annual Meeting of Stockholders, filed February 26, 1999)).
10.7 Deferred Compensation Plan (incorporated herein by
reference to Qwest's Form 10-K for the year ended
December 31, 1998 (File No. 000-22609)).
10.8 Equity Compensation Plan for Non-Employee Directors (incorporated
herein by reference to Qwest's Form 10-K for the year ended December
31, 1997 (File No. 000-22609)).
10.9 Qwest Communications International Inc. 401K Plan (incorporated herein
by reference to Qwest's Form 10-K for the year ended December 31, 1998
(File No. 000-22609)).
10.10 Employment Agreement dated December 21, 1996 with Joseph P. Nacchio
(Incorporated herein by reference to Form S-1 as declared effective on
June 23, 1997 (File No. 333-25391)).
10.11 Growth Share Plan Agreement with Joseph P. Nacchio, effective January
1, 1997, and Amendment thereto (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
10.12 Non-Qualified Stock Option Agreement with Joseph P. Nacchio, effective
June 1997 (incorporated herein by reference to Qwest's Form 10-K for the
year ended December 31, 1997 (File No. 000-22609)).
10.13 Promissory Note dated November 20, 1996 and Severance Agreement
dated December 1, 1996 with Robert S. Woodruff (Incorporated herein by
reference to Form S-1 as declared effective on June 23, 1997 (File No.
333-25391)).
10.14 Employment Agreement dated March 7, 1997 with Stephen M. Jacobsen
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.15 Employment Agreement dated September 19, 1997 with Larry Seese
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.16 Employment Agreement dated October 8, 1997 with Lewis O. Wilks
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.17 IRU Agreement dated as of October 18, 1996 with Frontier
Communications International Inc. (portions have been omitted pursuant
to a request for confidential treatment) (incorporated herein by reference
to Form S-1 as declared effective on June 23, 1997 (File No. 333-25391)).
S4-II-4
<PAGE>
10.18 IRU Agreement dated as of February 26, 1996 with WorldCom Network
Services, Inc. (portions have been omitted pursuant to a request for
confidential treatment) (incorporated herein by reference to Form S-1 as
declared effective on June 23, 1997 (File No. 333-25391)).
10.19 IRU Agreement dated as of May 2, 1997 with GTE (portions have been
omitted pursuant to a request for confidential treatment) (incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
10.20 LCI International, Inc. 1992 Stock Option Plan (incorporated by reference
to LCI's Registration Statement No. 33-60558).
10.21 LiTel Communications, Inc. 1993 Stock Option Plan (incorporated by
reference to LCI's Registration Statement No. 33-60558).
10.22 LCI International, Inc. 1994/1995 Stock Option Plan (incorporated by
reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.23 LCI International, Inc. 1995/1996 Stock Option
(incorporated by reference to LCI's Proxy Statement for
the 1995 Annual Meeting of Shareowners).
10.24 LCI International Management Services, Inc. Supplemental Executive
Retirement Plan (incorporated by reference to LCI's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995).
10.25 1997/1998 LCI International, Inc. Stock Option Plan (incorporated by
reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.26(a) 1995 Stock Option Plan of Icon CMT Corp. (incorporated
by reference to Icon CMT Corp.'s Annual Report on Form
10-K for the year ended December 31, 1996).
10.26(b) Amendment to Amended and Restated 1995 Stock Option Plan of Icon
CMT Corp. (incorporated herein by reference to Icon CMT Corp.'s
Registration Statement on Form S-1/A, No. 333-38339)).
10.27 U.S. Long Distance Corp. 1990 Employee Stock Option Plan (incorporated
herein by reference to Qwest's Form 10-K for the year ended December
31, 1998 (File No. 000-22609)).
10.28 Contractor Agreement dated January 18, 1993 by and between LCI
International Telecom Corp. and American Communications Network, Inc.
(incorporated by reference to LCI's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
S4-II-5
<PAGE>
10.29 Participation Agreement dated as of November 1996 among LCI
International, Inc., as the Construction Agent and as the Lessee, First
Security Bank, National Association, as the Owner Trustee under the Stuart
Park Trust the various banks and lending institutions which are parties
thereto from time to time as the Holders, the various banks and lending
institutions which are parties thereto from time to time as the Lenders and
NationsBank of Texas, N.A., as the Agent for the Lenders (incorporated
by reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.30 Agency Agreement between LCI International, Inc., as the Construction
Agent and First Security Bank, National Association, as the Owner Trustee
under the Stuart Park Trust as the Lessor dated as of November 15, 1996
(incorporated by reference to LCI's Annual Report on Form 10-K for the
year ended December 31, 1996).
10.31 Deed of Lease Agreement dated as of November 15, 1996 between First
Security Bank, National Association as the Owner Trustee under the Stuart
Park Trust, as Lessor and LCI International, Inc. as Lessee (incorporated
by reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.32 Common Stock Purchase Agreement dated as of December 14, 1998 with
Microsoft Corporation (incorporated by reference to Qwest's Current
Report on Form 8-K filed December 16, 1998).
10.33 Registration Rights Agreement dated December 14, 1998 with Microsoft
Corporation (incorporated herein by reference to Qwest's Current Report
on Form 8-K filed December 16, 1998).
10.34 Registration Rights Agreement dated as of April 18, 1999 with Anschutz
Company and Anschutz Family Investment Company LLC (incorporated
by reference to Qwest's Current Report on Form 8-K filed April 28, 1999).
10.35 Common Stock Purchase Agreement dated as of April 19, 1999 with
BellSouth Enterprises, Inc. (incorporated by reference to Qwest's Current
Report on Form 8-K/A filed April 28, 1999).
10.36 Registration Rights Agreement dated as of April 19, 1999 with BellSouth
Enterprises, Inc. (incorporated by reference to Qwest's Current Report on
Form 8-K/A filed April 28, 1999).
21 Subsidiaries of the Registrant (incorporated by reference to the Registrant's
Registration Statement on Form S-4 (File No. 333-65095) filed September
30, 1998).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Ernst & Young LLP.
S4-II-6
<PAGE>
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of Davis Polk & Wardwell (included in the
opinions filed as Exhibit 8.1 and Exhibit 8.2 to this
Registration Statement) (To Come).
23.6 Consent of counsel to U S WEST (included in the opinion
filed as Exhibit 8.3 and Exhibit 8.4 to this
Registration Statement) (To Come).
23.7 Consent of counsel to Frontier (included in the opinion filed as Exhibit 8(c)
to this Registration Statement) (To Come).
23.8 Consent of Donaldson, Lufkin & Jenrette Securities Corporation (To
Come).
23.9 Consent of ____________________ (To Come).
23.10 Consent of ____________________ (To Come).
24 Power of Attorney (To Come).
99.1 Form of Qwest Proxy Card (To Come).
99.2 Form of U S WEST Proxy Card (To Come).
99.3 Form of Frontier Proxy Card (To Come).
</TABLE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
S4-II-7
<PAGE>
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), such reoffering prospectus will contain
the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the Joint Proxy Statement/Prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement
when it became effective.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
S4-II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Denver, State of
Colorado, on June 20, 1999.
QWEST COMMUNICATIONS INTERNATIONAL INC.
(Registrant)
Date: June 20, 1999 By: /s/ Robert S. Woodruff
----------------------------------
Executive Vice President and
Chief Financial Officer
-----------------------
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert S. Woodruff and Drake S. Tempest, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) and supplements to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Joseph P. Nacchio Chairman and Chief Executive Officer June 20, 1999
- -------------------------
(Joseph P. Nacchio)
/s/ Robert S. Woodruff Executive Vice President, Chief June 20, 1999
- --------------------------Financial Officer-and-Director
(Robert S. Woodruff)
/s/ Cannon Y. Harvey Director June 20, 1999
- --------------------------
(Cannon Y. Harvey)
/s/ Craig D. Slater Director June 20, 1999
- --------------------------
(Craig D. Slater)
/s/ Jerry R. Davis Director June 20, 1999
- --------------------------
(Jerry R. Davis)
S4-II-9
<PAGE>
/s/ Richard T. Liebhaber Director June 20, 1999
- --------------------------
(Richard T. Liebhaber)
/s/ Douglas M. Karp Director June 20, 1999
- --------------------------
(Douglas M. Karp)
S4-II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger dated as of June [__], 1999 among U S
WEST, Inc., Qwest Communications International Inc. and [Merger Sub]
(To Come).
2.2 Agreement and Plan of Merger dated as of June [__], 1999 among Qwest
Communications International Inc., [Merger Sub] and Frontier Corporation
(To Come).
3.1 Amended and Restated Certificate of Incorporation of Qwest (incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
3.2 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of Qwest (incorporated herein by reference to Form S-3 (File
No. 333-58617)).
3.3 Amended and Restated Bylaws of Qwest (incorporated
herein by reference to Qwest's Form 10-K for the year
ended December 31, 1998 (File No.
000-22609)).
4.1(a) Indenture dated as of October 15, 1997 with Bankers Trust Company
relating to Qwest's 9.47% notes (incorporated herein by reference to Form
S-4 as declared effective on January 5, 1998 (File No. 333-42847)).
4.1(b) Indenture dated as of August 28, 1997 with Bankers Trust Company
relating to Qwest's 10 7/8% notes (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
4.1(c) Indenture dated as of January 29, 1998 with Bankers Trust Company
relating to Qwest's 8.29% notes (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
4.1(d) Indenture dated as of November 27, 1998 with Bankers Trust Company
relating to Qwest's 7.25% notes (incorporated herein by reference to the
exhibit of the same number in Form S-4 (File No. 333-71603)).
4.1(e) Indenture dated as of November 4, 1998 with Bankers Trust Company
relating to Qwest's 7.50% notes (incorporated herein by reference to the
exhibit of the same number in Form S-4 (File No. 333-71603)).
4.2(a) Registration Agreement dated November 4, 1998 with Salomon Brothers
Inc. relating to Qwest's 7.50% Senior Discount Notes Due 2008
(incorporated herein by reference to the exhibit of the same number in
Form S-4 (File No. 333-71603)).
S4-II-11
<PAGE>
4.2(b) Registration Agreement dated November 27, 1998 with Salomon Brothers
Inc. relating to Qwest's 7.25% Senior Discount Notes Due 2008
(incorporated herein by reference to the exhibit of the same number in
Form S-4 (File No. 333-71603)).
4.3 Indenture dated as of June 23, 1997 between LCI International, Inc., and
First Trust National Association, as trustee, Providing for the Issuance of
Senior Debt Securities, including Resolutions of the Pricing Committee of
the Board of Directors establishing the terms of the 7.25% Senior Notes
due June 15, 2007 (incorporated herein by reference to exhibit 4(c) in
LCI's Current Report on Form 8-K dated June 23, 1997).
4.4 Credit Agreement, dated as of March 31, 1999, among Qwest
Communications International Inc., as Borrower, NationsBank, N.A., as
Administrative Agent, and the Lenders party thereto (incorporated herein
by reference to Qwest's Form 10-Q for the quarter ended March 31, 1999
(File No. 000-22609)).
5 Opinion of counsel to Qwest regarding the validity of the securities being
registered (To Come).
8.1 Opinion of counsel to Qwest regarding material federal
income tax consequences relating to the mergers (To
Come).
8.2 Opinion of counsel to Qwest regarding the lack of effect of the U S WEST
merger on the tax-free qualification of the prior spin-off of U S WEST (To
Come).
8.3 Opinion of counsel to U S WEST regarding material
federal income tax consequences relating to the U S WEST
merger (To Come).
8.4 Opinion of counsel to U S WEST regarding the lack of effect of the U S
WEST merger on the tax-free qualification of the prior spin-off of U S
WEST (To Come).
8.5 Opinion of counsel to Frontier regarding material
federal income tax consequences relating to the Frontier
merger (To Come).
10.1 Voting Agreement dated as of June __, 1999 among U S WEST, Inc. and
Anschutz Company (To Come).
10.2 Voting Agreement dated as of June __, 1999 between Frontier Corporation
and Anschutz Company (To Come).
10.3 Stock Option Agreement dated as of June __, 1999 by and between
Frontier Corporation and Qwest Communications International Inc. (To
Come).
10.4 Growth Share Plan, as amended, effective October 1, 1996 (Incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
S4-II-12
<PAGE>
10.5 Equity Incentive Plan (Incorporated herein by reference to Form S-1 as
declared effective on June 23, 1997 (File No. 333-25391)).
10.6 Qwest Communications International Inc. Employee Stock Purchase Plan
(incorporated herein by reference to Qwest's Preliminary Proxy Statement
for the Annual Meeting of Stockholders, filed February 26, 1999)).
10.7 Deferred Compensation Plan (incorporated herein by
reference to Qwest's Form 10-K for the year ended
December 31, 1998 (File No. 000-22609)).
10.8 Equity Compensation Plan for Non-Employee Directors (incorporated
herein by reference to Qwest's Form 10-K for the year ended December
31, 1997 (File No. 000-22609)).
10.9 Qwest Communications International Inc. 401K Plan (incorporated herein
by reference to Qwest's Form 10-K for the year ended December 31, 1998
(File No. 000-22609)).
10.10 Employment Agreement dated December 21, 1996 with Joseph P. Nacchio
(Incorporated herein by reference to Form S-1 as declared effective on
June 23, 1997 (File No. 333-25391)).
10.11 Growth Share Plan Agreement with Joseph P. Nacchio, effective January
1, 1997, and Amendment thereto (incorporated herein by reference to
Qwest's Form 10-K for the year ended December 31, 1997 (File No. 000-
22609)).
10.12 Non-Qualified Stock Option Agreement with Joseph P. Nacchio, effective
June 1997 (incorporated herein by reference to Qwest's Form 10-K for the
year ended December 31, 1997 (File No. 000-22609)).
10.13 Promissory Note dated November 20, 1996 and Severance Agreement
dated December 1, 1996 with Robert S. Woodruff (Incorporated herein by
reference to Form S-1 as declared effective on June 23, 1997 (File No.
333-25391)).
10.14 Employment Agreement dated March 7, 1997 with Stephen M. Jacobsen
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.15 Employment Agreement dated September 19, 1997 with Larry Seese
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.16 Employment Agreement dated October 8, 1997 with Lewis O. Wilks
(incorporated herein by reference to Qwest's Form 10-K for the year ended
December 31, 1997 (File No. 000-22609)).
10.17 IRU Agreement dated as of October 18, 1996 with Frontier
Communications International Inc. (portions have been omitted pursuant
to a request for confidential treatment) (incorporated herein by reference
to Form S-1 as declared effective on June 23, 1997 (File No. 333-25391)).
S4-II-13
<PAGE>
10.18 IRU Agreement dated as of February 26, 1996 with WorldCom Network
Services, Inc. (portions have been omitted pursuant to a request for
confidential treatment) (incorporated herein by reference to Form S-1 as
declared effective on June 23, 1997 (File No. 333-25391)).
10.19 IRU Agreement dated as of May 2, 1997 with GTE (portions have been
omitted pursuant to a request for confidential treatment) (incorporated
herein by reference to Form S-1 as declared effective on June 23, 1997
(File No. 333-25391)).
10.20 LCI International, Inc. 1992 Stock Option Plan (incorporated by reference
to LCI's Registration Statement No. 33-60558).
10.21 LiTel Communications, Inc. 1993 Stock Option Plan (incorporated by
reference to LCI's Registration Statement No. 33-60558).
10.22 LCI International, Inc. 1994/1995 Stock Option Plan (incorporated by
reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.23 LCI International, Inc. 1995/1996 Stock Option
(incorporated by reference to LCI's Proxy Statement for
the 1995 Annual Meeting of Shareowners).
10.24 LCI International Management Services, Inc. Supplemental Executive
Retirement Plan (incorporated by reference to LCI's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995).
10.25 1997/1998 LCI International, Inc. Stock Option Plan (incorporated by
reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.26(a) 1995 Stock Option Plan of Icon CMT Corp. (incorporated
by reference to Icon CMT Corp.'s Annual Report on Form
10-K for the year ended December 31, 1996).
10.26(b) Amendment to Amended and Restated 1995 Stock Option Plan of Icon
CMT Corp. (incorporated herein by reference to Icon CMT Corp.'s
Registration Statement on Form S-1/A, No. 333-38339)).
10.27 U.S. Long Distance Corp. 1990 Employee Stock Option Plan (incorporated
herein by reference to Qwest's Form 10-K for the year ended December
31, 1998 (File No. 000-22609)).
10.28 Contractor Agreement dated January 18, 1993 by and between LCI
International Telecom Corp. and American Communications Network, Inc.
(incorporated by reference to LCI's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
S4-II-14
<PAGE>
10.29 Participation Agreement dated as of November 1996 among LCI
International, Inc., as the Construction Agent and as the Lessee, First
Security Bank, National Association, as the Owner Trustee under the Stuart
Park Trust the various banks and lending institutions which are parties
thereto from time to time as the Holders, the various banks and lending
institutions which are parties thereto from time to time as the Lenders and
NationsBank of Texas, N.A., as the Agent for the Lenders (incorporated
by reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.30 Agency Agreement between LCI International, Inc., as the Construction
Agent and First Security Bank, National Association, as the Owner Trustee
under the Stuart Park Trust as the Lessor dated as of November 15, 1996
(incorporated by reference to LCI's Annual Report on Form 10-K for the
year ended December 31, 1996).
10.31 Deed of Lease Agreement dated as of November 15, 1996 between First
Security Bank, National Association as the Owner Trustee under the Stuart
Park Trust, as Lessor and LCI International, Inc. as Lessee (incorporated
by reference to LCI's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.32 Common Stock Purchase Agreement dated as of December 14, 1998 with
Microsoft Corporation (incorporated by reference to Qwest's Current
Report on Form 8-K filed December 16, 1998).
10.33 Registration Rights Agreement dated December 14, 1998 with Microsoft
Corporation (incorporated herein by reference to Qwest's Current Report
on Form 8-K filed December 16, 1998).
10.34 Registration Rights Agreement dated as of April 18, 1999 with Anschutz
Company and Anschutz Family Investment Company LLC (incorporated
by reference to Qwest's Current Report on Form 8-K filed April 28, 1999).
10.35 Common Stock Purchase Agreement dated as of April 19, 1999 with
BellSouth Enterprises, Inc. (incorporated by reference to Qwest's Current
Report on Form 8-K/A filed April 28, 1999).
10.36 Registration Rights Agreement dated as of April 19, 1999 with BellSouth
Enterprises, Inc. (incorporated by reference to Qwest's Current Report on
Form 8-K/A filed April 28, 1999).
21 Subsidiaries of the Registrant (incorporated by reference to the Registrant's
Registration Statement on Form S-4 (File No. 333-65095) filed September
30, 1998).
23.1 Consent of Arther Andersen LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Ernst & Young LLP
S4-II-15
<PAGE>
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of Davis Polk & Wardwell (included in the
opinions filed as Exhibit 8.1 and Exhibit 8.2 to this
Registration Statement) (To Come).
23.6 Consent of counsel to U S WEST (included in the opinion
filed as Exhibit 8.3 and Exhibit 8.4 to this
Registration Statement) (To Come).
23.7 Consent of counsel to Frontier (included in the opinion filed as Exhibit 8(c)
to this Registration Statement) (To Come).
23.8 Consent of Donaldson, Lufkin & Jenrette Securities Corporation (To
Come).
23.9 Consent of ____________________ (To Come).
23.10 Consent of ____________________ (To Come).
24 Power of Attorney (To Come).
99.1 Form of Qwest Proxy Card (To Come).
99.2 Form of U S WEST Proxy Card (To Come).
99.3 Form of Frontier Proxy Card (To Come).
</TABLE>
S4-II-16
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 16, 1998
(except with respect to the matter discussed in Note 15, as to which the date
is March 16, 1998) included in the Qwest Communications International Inc.'s
Amendment No. 1 to Form S-4 Registration Statement File No. 333-65095 and to
all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------------
Columbus, Ohio,
June 18, 1999
S4-II-17
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (No.
____________) of Qwest Communications International Inc. to be filed on or
about June 21, 1999, of our report, dated February 2, 1999, relating to the
consolidated balance sheets of Qwest Communications International Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1998, and our report, dated
February 2, 1999, pertaining to the related consolidated financial statement
schedule, which reports appear in the December 31, 1998 annual report on Form
10-K of Qwest Communications International Inc., and to the reference to our
firm under the heading "Experts" in the Registration Statement.
/s/ KPMG LLP
---------------------------
Denver, Colorado
June 18, 1999
S4-II-18
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
this Registration Statement (Form S-4 No. ___________) of Qwest Communications
International Inc. and to the incorporation by reference therein of our report
dated February 14, 1998, with respect to the financial statements of Frontier
Media Group, Inc. included in Amendment No. 1 to the Registration Statement of
Qwest Communications International Inc. (Form S-4 No. 333- 65095) dated
December 10, 1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
------------------------------
Philadelphia, Pennsylvania
June 18, 1999
S4-II-19
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Qwest
Communications International Inc. ("Qwest") of our report dated March 6, 1998,
except as to the acquisition and restatement described in Note 2, which is as
of September 30, 1998, relating to the consolidated financial statements of
Icon CMT Corp., which is incorporated by reference in Qwest's Registration
Statement on Form S-4 (No. 333-65095) dated December 10, 1998 (the "Form S-4").
We also consent to the application of such report to the Financial Statement
Schedule of Icon CMT Corp. for the three years ended December 31, 1997 under
item 21(b) of the Form S-4 when such schedule is read in conjunction with the
consolidated financial statements referred to in our report. The audits
referred to in such report also included this schedule. We also consent to the
reference to us under the heading "Experts" in the Form S-4.
/s/ PRICEWATERHOUSECOOPERS LLP
--------------------------------
Stamford, Connecticut
June 18, 1999
S4-II-20
