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Qwest, McLeodUSA Call Up $600 Million Deal

Qwest Communications International Inc. Tuesday opened up its marketplace when it agreed to provide McLeodUSA with voice and data communications services.

The deal, which is anticipated to bring Qwest about $600 million in revenue over the next three years, brings the company one step closer to providing long-distance service nationally, according to company officials.

Since its purchase of U.S. West in June, Qwest has been held back from offering long-distance service in the states where it offers local calling.

The acquisition produced a company featuring Qwest's broadband Internet data, video and voice communications capabilities with digital subscriber line (DSL), wireless services and local communications services in 14 states.

However, regulators have been waiting for proof that the markets will be open to competitors before Qwest gets the green light to offer long-distance service.

"We said from day one of our acquisition of U.S. West that Qwest was going to aggressively move to open up all markets to competition and this is further proof we're doing that," said Joseph P. Nacchio, Qwest chairman and chief executive officer.

In fact, the company expects its territory will begin expanding by the summer of 2001. "We are currently working on OSS testing exclusively in Arizona as well as a collaborative process in the 13 other states," said Bill Myers, Qwest spokesperson. "By the summer, we anticipate the FCC will give us the green light to provide long-distance service in at least one state -- most likely it will be either Colorado, Arizona or Nebraska."

Further, the company is holding workshops to level the playing field and teach competitors and regulators how its dispatch system operates, Myers said.

The long-term agreement will dually allow MacLeod, a telecommunications provider, to offer its customers such services as DSL and voice messaging while spending less on network expansion.

"This multi-year, multi-product, multi-million-dollar agreement will make it possible for McLeodUSA to serve its customers in Qwest territory through an expanded set of services, products and platforms," said Steve Gray, president and chief operating officer of McLeodUSA. "This agreement will generate revenue and capital expenditure savings while allowing us to harness the potential of Qwest system components and services."

This long-term agreement is unique in the industry in that it was negotiated on a business-to-business basis instead of being arbitrated by regulators, according to Nacchio.

"This is a real win-win situation: McLeodUSA is able to better serve its customers and Qwest receives substantial commitments for new business from an important wholesale customer," he said.

Shares of MacLeod yesterday rose from $1.19 to $18.81. Shares of Qwest remained at $50.



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