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File No. 33-49647
Rule 424(b)(3)
PRICING SUPPLEMENT NO. 3 DATED MARCH 11, 1994
(To Prospectus and Prospectus Supplement
December 17, 1993)
$30,000,000
U S WEST COMMUNICATIONS, INC.
Medium-Term Notes
Due Nine Months or More From Date of Issue
Form of Note: Except as set forth herein, the
Notes offered hereby are "Floating
Rate Notes" and have such terms as
are described in the accompanying
Prospectus Supplement dated
December 17, 1993 relating to
Floating Rate Notes.
Settlement Date: March 25, 1994
Maturity Date: March 25, 1999
Issue Price: 100%
Initial Interest Rate: 4.68%
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Interest Payment Dates: Quarterly in arrears on each March
25, June 25, September 25 and
December 25, and on the Maturity
Date. If any Interest Payment Date
would otherwise be a day that is
not a Business Day, interest will
be paid on the next succeeding
Business Day. Interest payments
will include the amount of interest
accrued from and including the most
recent Interest Payment Date to
which interest has been paid (or
from and including the Original
Issue Date) to but excluding the
applicable Interest Payment Date,
without adjustment for changes in
the Interest Payment Date if the
scheduled Interest Payment Date is
not a Business Day.
Interest Reset Dates: Each March 25, June 25, September
25 and December 25 from June 25,
1994 to and including December 25,
1998 (whether or not such day is a
Business Day).
Interest
Determination Dates: The "Interest Determination Date"
pertaining to an Interest Reset
Date will be the second Business
Day prior to such Interest Reset
Date.
Calculation Agent: Lehman Brothers Inc.
Index Maturity: Two years
Interest Rate Basis: Constant Maturity Treasury Rate.
"Constant Maturity Treasury Rate"
means, with respect to any Interest
Determination Date, the rate set
forth for the related Reference
Date (as hereinafter defined) in
"Statistical Release H.15(519),
Selected Interest Rates", as
published by the Board of Governors
of the Federal Reserve System, or
any successor publication, opposite
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the caption "U.S. Government/
Securities/Treasury Constant
Maturities", in the Index Maturity
with respect to the applicable
Interest Determination Date.
"Reference Date" means the last
Business Day included in H.15(519)
published for the Calendar Week
immediately preceding the Interest
Determination Date. "Calendar
Week" means the week beginning on
each Monday.
If the Constant Maturity Treasury
Rate is not published as described
above by 3:00 p.m., New York City
time, on the applicable Interest
Determination Date, the Constant
Maturity Treasury Rate for such
Interest Determination Date will be
the bond equivalent yield to
maturity of the arithmetic mean (as
calculated by the Calculation
Agent) of the secondary market bid
rates, as of 3:00 p.m., New York
City time, on the applicable
Interest Determination Date,
reported, according to their
written records, by three leading
primary United States government
securities in The City of New York
(each, a "Reference Dealer")
selected by the Calculation Agent,
for the most recently issued direct
noncallable fixed rate Treasury
Bills with an original maturity
approximately equal to the Index
Maturity.
If the Calculation Agent is not
able to obtain such quotations from
at least three Reference Dealers as
described above, the Constant
Maturity Treasury Rate for such
Interest Determination Date will
remain the Constant Maturity
Treasury Rate then in effect on
such Interest Determination Date.
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Spread Adjustment
Formula: CMT - .35%.
Accrued Interest Factor: For purposes of calculating the
accrued interest factor, the
interest factor for each day in the
interest period will be computed by
dividing the interest rate
applicable to such day by the
actual number of days in the year.
Business Day: Any day that is not a Saturday or
Sunday in The City of New York and
is not a day on which banking
institutions are generally
authorized or obligated by law or
executive order to close.
Agent: The Notes offered hereby are being
offered through Lehman Brothers
Inc., as agent.
Terms used but not defined in this
Pricing Supplement shall have the
meanings specified in the above
-referenced Prospectus and
Prospectus Supplement.
TAXATION
The following discussion supplements the discussion
contained in the accompanying Prospectus Supplement under the
heading "Certain United States Federal Income Tax Considerations
- -- Original Issue Discount".
On January 27, 1994, the IRS issued final Treasury Regulations
(the "OID Regulations") under the original issue discount
provisions of the Code. The OID Regulations, which replaced the
Proposed OID Regulations, generally apply to debt instruments
issued on or after April 4, 1994; therefore by their terms they
would not apply to the Notes offered hereby. Nevertheless,
taxpayers may rely on the OID Regulations for debt instruments
issued after December 21, 1992.
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Under the OID Regulations, Floating Rate Notes (such as the
Notes offered hereby) are subject to special rules whereby a
Floating Rate Note will qualify as a "variable rate debt
instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Floating Rate Note
by more than a specified de minimis amount and (b) it provides for
stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single
fixed rate and one or more qualified floating rates, (iii) a single
objective rate, or (iv) a single fixed rate and a single objective
rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where
variations in the value of such rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the Floating Rate Note is
denominated. Although a multiple of a qualified floating rate will
generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and
a fixed multiple that is greater than zero but not more than 1.35
will constitute a qualified floating rate. A variable rate equal
to the product of a qualified floating rate and a fixed multiple
that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more
qualified floating rates that can reasonably be expected to have
approximately the same values throughout the term of the Floating
Rate Note (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the Floating
Rate Note's issue date) will be treated as a single qualified
floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is
subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e.,
a floor) may, under certain circumstances, fail to be treated as a
qualified floating rate under the OID Regulations. An "objective
rate" is a rate that is not itself a qualified floating rate but
which is determined using a single fixed formula and which is based
upon (i) one or more qualified floating rates, (ii) one or more
rates where each rate would be a qualified floating rate for a debt
instrument denominated in a currency other than the currency in
which the Floating Rate Note is denominated, (iii) either the yield
or changes in the price of one or more items of actively traded
personal property or (iv) a combination of objective rates. The
OID Regulations also provide that other variable interest rates may
be treated as objective rates if so designated by the IRS in the
future. Despite the foregoing, a variable rate of interest on a
Floating Rate Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the
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first half of the Floating Rate Note's term will be either
significantly less than or significantly greater than the average
value of the rate during the final half of the Floating Rate Note's
term. A "qualified inverse floating rate" is any objective rate
where such rate is equal to a fixed rate minus a qualified floating
rate, as long as variations in the rate can reasonably be expected
to inversely reflect contemporaneous variations in the cost of
newly borrowed funds. The OID Regulations also provide that if a
Floating Rate Note provides for stated interest at a fixed rate for
an initial period of less than one year followed by a variable rate
that is either a qualified floating rate or an objective rate and
if the variable rate on the Floating Rate Note's issue date is
intended to approximate the fixed rate (e.g., the value of the
variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate
and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be.
If a Floating Rate Note that provides for stated interest at
either a single qualified floating rate or a single objective rate
throughout the term thereof qualifies as a "variable rate debt
instrument" under the OID Regulations, then any stated interest on
such Note which is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly.
Thus, a Floating Rate Note that provides for stated interest at
either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate
debt instrument" under the OID Regulations will generally not be
treated as having been issued with original issue discount unless
the Floating Rate Note is issued at a "true" discount (i.e., at a
price below the Note's stated principal amount) in excess of a
specified de minimis amount.
Based upon the foregoing, the Notes offered hereby would
qualify as "variable rate debt instruments" under the OID
Regulations. Furthermore, under the OID Regulations, the Notes
offered hereby would not be treated as having been issued with
original issue discount and all payments of interest on the Notes
would constitute payments of "qualified stated interest" and would
be taxable to a U.S. Holder as ordinary interest income at the time
such payments are accrued or are received (in accordance with the
U.S. Holder's regular method of tax accounting).
