Qwest To Add 700 POPs With Purchase From Allegiance Telecom

Under the terms of the agreement, Denver-based Qwest would purchase the Allegiance assets for approximately $300 million in cash. In addition, Qwest would issue about $90 million of convertible debt with a conversion price of $6.10 per share and a coupon of 1.5 percent.

The deal is subject to approval by the U.S. Bankruptcy Court and other government regulatory agencies. If approved, the acquisition would provide Qwest with additional network facilities to support the delivery of end-to-end voice and data communications to business customers across the United States, said Qwest Chairman and CEO Richard Notebaert.

"Upon closing of this transaction, Qwest will have more POPs than any other inter-exchange carrier in the [United States], allowing us to immediately expand our ability to serve more businesses than ever before," Notebaert said in a prepared statement.

Specifically, Qwest plans to purchase Allegiance network assets in 36 metro markets, 31 of which are outside the current Qwest local service region. Allegiance currently carries almost $550 million in telecommunications traffic across these assets.

According to Notebaert, Qwest plans to combine and optimize this traffic with its existing network over the next six months. He added that the telecommunications giant expects to achieve "significant cost synergies" by using Dallas-based Allegiance's local network POPs to connect Qwest's network to business customers.

The expanded access to local network facilities also was expected to support the Qwest's delivery of new enterprise communications services, such as VoIP.

Though there was no formal plan to incorporate the Allegiance assets into Qwest's channel program, Notebaert hinted that the companies would iron out that aspect of the integration in 2004.

Earlier this year, the Qwest Business Partner Program was awarded top placement in the Partnership subcategory of the IP and Data Services product category of the VARBusiness 2003 Annual Report Card.

Allegiance filed for financial restructuring under Chapter 11 of the U.S. Bankruptcy Code on May 14.