RealTime IT News

Qwest Pledges $350M to Allegiance

Looking to add small and mid-sized business customers, Qwest is offering $350 million in cash and assumed debt for Allegiance Telecom , according to The Wall Street Journal.

Talks are still in the early stages and neither company will comment.

The deal would bring Qwest new corporate customers for its local and long-distance phone service; Internet access; colocation and Web hosting in 36 U.S. cities. This group is more likely to upgrade service and less likely to switch carriers than residential voice customers, who have deserted Qwest and its Baby Bell brethren for wireless providers.

It would also raise Qwest's revenue by several hundred million dollars a year, helping it to compete with the large carriers such as AT&T and MCI, which is emerging from bankruptcy in January.

For the sale to happen, Allegiance, under Chapter 11 bankruptcy protection since May, would have to request a formal auction process from the judge overseeing its case. The Dallas-based company may still choose to remain independent.

The clock is ticking however. If it intends to emerge as a standalone company, Allegiance must file a reorganization plan outlining how it will address its $1.4 billion debt load. It must also convince creditors and the court to sign off.

The carrier has already received one filing deadline extension. It currently has a Dec. 16 deadline, according to documents filed with the Securities and Exchange Commission.

In addition to Quest, at least two other potential buyers have shown interest, which could raise the asking price and put Qwest out of the running, the newspaper reported.

Allegiance reported a loss of $63 million in the third quarter on revenue of $188 million. It cited customer churn and a decrease in the size of its sales force as factors.