Qwest denies interest in Winstar buyout

Summary:Qwest Communications International says it has no plan to purchase Winstar Communications, which recently announced layoffs and other cost-cutting measures.

Qwest Communications International issued a statement Thursday denying it had any interest in purchasing Winstar Communications, a troubled fixed-wireless carrier that announced layoffs Thursday along with a halt in its construction plans.

High-speed bandwidth provider Qwest stated that it does not intend to acquire, purchase any assets of, or invest in Winstar or any other fixed-wireless company.

On Thursday, Winstar announced plans to layoff 2,000 of the company's 4,500 employees and cut back on expanding its network in order to focus on acquiring more customers within the 5,400 buildings that the New York-based company already serves.

Winstar also said in a statement that it was engaged in "discussions concerning several material transactions. Once these matters are concluded, the company anticipates providing additional details on its business plan."

Winstar is only the latest company to be hit by a harsh downturn in the telecommunications industry, extending from the component makers to the equipment providers to the network operators themselves. Smaller carriers, such as Winstar, have been especially hard hit, since their business was built on the presumption that the capital markets--rather than sales to customers--could fuel their expansion plans.

"There are a lot of telecom stocks and bonds that are down terribly...(and) a lot of concern that these companies don't have a viable business plan," said Gary Jacobi, an analyst at Deutsche Banc Alex Brown, who thinks that a Qwest purchase of Winstar is an "extremely low probability."

Jacobi believes some of these foundering companies will try to persuade investors that they will get bought out by a strong suitor, hoping such news will keep their stock afloat. Jacobi thinks that Winstar investors would be more likely than the company itself to start that kind of rumor.

Analyst Adam Giansiracusa of Frost Securities, who covers both companies, thinks that Winstar's announcement of network cutbacks also makes it less likely that Denver-based Qwest would scoop up the company.

The scale back "makes their network not big enough to pay down their debt," he said. Winstar reported $3.66 billion in total debt at the end of December, and Giansiracusa believes that Qwest would be loath to inherit such a load.

Yet, Winstar's stock has taken a beating recently, which makes it relatively more attractive on price. The stock has fallen from its 52-week high of $61.50 a share to less than $1.

Topics: Networking

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