States’ Qwest Probe Pushes Shares to New Low

Shares of Qwest Communications International Inc. fell to an all-time low Monday after the voice and data services company said it was being investigated by several states for alleged anti-competitive deals with rivals.

Qwest, already under investigation by the Securities and Exchange Commission, saw its shares close off 79 cents, or 14%, to $4.96 on the New York Stock Exchange, due in part to fears its entry into long-distance service in its territory could be delayed.

The dominant local phone company in 14 states from Minnesota to Washington, Qwest is being investigated by officials in several states for allegedly cutting secret deals with rivals who agreed not to oppose the firm’s efforts to expand its long-distance business.

The Wall Street Journal cited unnamed officials and Qwest rivals as saying the deals, purportedly giving favored carriers better terms for the use of parts of Qwest’s local-phone network, suggested the company tried to buy the silence of rivals on the issue of what access local phone providers have to give competitors.

The issue is not about Qwest failing to allow competition, but whether the company should have notified the respective state public utility commissions about the deals, according to Steve Davis, Qwest senior vice president of policy and law.

Qwest, like other telecom firms seeking to offer both local and long-distance service, is required to demonstrate to state and federal regulators that its local networks are open to rivals and available on equal terms before it can offer the service in its home territory.

The Baby Bells have been pushing to enter long-distance markets, but have been criticized for not allowing an even playing field.

The states’ investigations, by Minnesota, Arizona, Oregon, New Mexico and Utah, come at a difficult time for Qwest because it already faces the SEC probe over its 2000 and 2001 revenue. What’s more, the firm’s heavy debt load amid a faltering telecom market has spooked investors.

“There is probably a likelihood the state probes could delay their long-distance entry in their region,” said Tim Ghriskey, with money management firm Ghriskey Capital Partners. “That sets back their recovery efforts.”