Telecommunications company Qwest Communications International Inc. (Q) has started to receive preliminary bids for its long-distance voice and data network, but the bids are well below the $2 billion to $3 billion the company sought, the Wall Street Journal reported Thursday. The lower bids may force the company to either call off the auction or accept a significant discount from the valuation the company originally hoped for, the report noted.
Pegging a value for Qwest's assets is seen as difficult for potential buyers as the company does not break out its revenue by long-distance network versus local-access network. Some of the bidders have valued Qwest's long-haul network at below $1 billion, the WSJ report said, citing people familiar with the matter. The bids were due Monday, but were extended by Qwest, according to the report.
Among the bidders, Level 3 Communications Inc. (LVLT) is said to be the most likely buyer for the network. XO Communications, controlled by billionaire investor Carl Icahn, and tw telecom inc. (TWTC), have also reportedly expressed interest in the network. However, large telecom companies including AT&T, Inc. (T), Sprint Nextel Corp. (S) and Verizon Communications Inc. (VZ) have decided not to participate in the bid, the WSJ report noted.
The sale of Qwest's long-distance network, which carries calls and Internet traffic for other phone carriers, is seen as part of the company's move to unload its nearly $14 billion debt. The long-distance network unit also provides advanced telecom services to businesses and government agencies. However, finding a buyer for the business has been difficult as companies across the telecom sector are in cash-preservation mode and due to lower availability of credit.
In light of the challenging economic environment, many firms in the communication sector are implementing cost-saving programs, including massive workforce reductions to pull themselves out from the economic meltdown. Qwest has been hurt by the slowdown as some customers switched over to cable or Internet phone services and some entirely shifted to wireless. Unlike peers such as AT&T and Verizon, Qwest does not own a wireless network to set right the mayhem caused by the recession.
Q closed Thursday's regular trading session at $4.19, down $0.21 or 4.77% on a volume of 34.23 million shares.
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