For Immediate Release
Qwest Media Contact: Qwest Investor Contact:
Alexander Communications Qwest Communications
Erin McKelvey Lee Wolfe
(303) 615-5070 ext. 108 (800) 567-7296
emckelve@alexander-pr.com 1wolfe@qwest.net
http://www.qwest.net
LCI Media Contact: LCI Investor Contact:
LCI International LCI International
Gerry Simone Kevin Taback
(703) 848-4478 (703) 848-4493
simoneg@lci.com tabackk@lci.com
http://www.lci.com http://www.lci.com
QWEST AND LCI INTERNATIONAL ANNOUNCE $4.4 BILLION MERGER
Combined Entity To Become Fourth Largest Long-Distance Company
Denver, CO/McLean, VA - March 9, 1998 - Qwest Communications
International Inc. and LCI International, Inc. today announced the
signing of a definitive merger agreement. The merger will create the
fourth-largest U.S. long distance company and one of the fastest growing
companies in the communications industry. The all-stock transaction is
valued at approximately $4.4 billion. The merger enables the LCI
nationwide customer base to fully leverage the capabilities and
efficiencies of the Qwest Macro Capacity SM fiber network and allows
Qwest to take full advantage of LCI's sales and marketing expertise,
distribution channels, intelligent network platform, as well as the
company's customer care and billing system. The combined companies had
1997 revenues of $2.3 billion, serve over two million business and
residential customers and have a total current equity market
capitalization of over $11 billion. (See attached fact sheet for further
detail.)
The board of directors of each company have approved the merger. The
terms of the merger agreement call for each LCI share to be converted
into $42.00 of Qwest common stock, under current market conditions. Based
on the closing prices of Qwest and LCI on March 6, 1998, LCI shareholders
would receive approximately 122.4 million newly issued shares of Qwest
stock, or 36.4 percent of the combined company's shares. The merger is
intended to qualify as a tax-free reorganization and will be accounted
for as a purchase.
"Brian Thompson and the LCI team have built a world class communications
company. Combining their customer base and their highly competitive
people with those at Qwest, and their state of the art billing and
customer care platforms with the Qwest network creates a powerful new
company," said Joseph P. Nacchio, president and CEO of Qwest. "Qwest's
ability to sell next generation data services is greatly enhanced by the
LCI sales, marketing and distribution strengths. This merger accelerates
both Qwest's and LCI's business plans by several years."
The combination of Qwest and LCI will result in significant operating and
financial benefits. The merger will deliver greater network efficiencies,
eliminate duplicate efforts to build sales and systems infrastructure,
avoid duplication of capital spending programs and accelerate the
companies' data and international strategies.
"LCI has achieved a 40 percent average annual revenue growth rate over
the last 5 years and is one of the most successful and fastest growing
telecommunications carriers in the U.S.," said H. Brian Thompson,
chairman and CEO of LCI. "We anticipate that Qwest's technologically
advanced network will enable us to further accelerate our performance."
An integration team composed of four senior executives from each company
has been formed to oversee the combination process to ensure that
operational benefits are fully realized. LCI will receive two seats on
Qwest's board of directors, one of which will be filled by H. Brian
Thompson, who will become vice chairman of the board. Completion of the
transaction is anticipated to occur during the third quarter of l998. The
transaction is subject to the majority vote of the shareholders of Qwest
and LCI and to other customary conditions such as receipt of regulatory
approvals. The majority shareholder of Qwest has agreed to vote in favor
of the transaction.
The actual number of shares of Qwest common stock to be exchanged for
each LCI share will be determined by dividing $42 by a 15-day volume
weighted average of trading prices for Qwest common stock prior to the
closing, but will not be less than 1.0625 shares (if Qwest's average
stock price exceeds $39.53) or more than 1.5583 shares (if Qwest's
average stock price is less than $26.95). If Qwest's average stock price
is less than $26.95, LCI may terminate the merger unless Qwest then
agrees to exchange for each share of LCI the number of Qwest shares
determined by dividing $42 by such average price.
The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 16,285 mile network will serve more than 125
cities, which represent approximately 80% of the data and voice traffic
originating in the United States, upon its scheduled completion in the
second quarter of 1999. Currently, more than 3,600 miles are activated
from Los Angeles to Columbus, Ohio. Qwest is also extending its network
1,400 miles into Mexico with completion slated for late third quarter
1998.
The Qwest Macro Capacity Fiber network is designed with a highly reliable
and secure bi-directional, line switching OC-192 SONET ring architecture.
Upon completion, the network will offer a self-healing system that
provides the ultimate security and reliability by allowing instantaneous
rerouting in the event of a fiber cut or equipment failure.
About LCI International
LCI International, Inc. (NYSE:LCI), one of the nation's fastest-growing
long-distance telecommunications carriers, provides a full array of
worldwide voice and data transmission services to businesses, residential
customers and other carriers through its 4,500 mile fiber-optic network
is planned to be 8,500 miles by the end of the year. LCI International,
Inc. is headquartered in McLean, VA, with offices in more than 60
locations, including national network control and customer service
centers, and regional operations in various locations throughout the
United States.
About Qwest
Qwest Communications International Inc. (NASDAQ:QWST) is a multimedia
communications company building a high-capacity, fiber optic network for
the 21st century. With its cutting-edge technology, Qwest will deliver
high-quality data, video and voice connectivity securely and reliably to
businesses, consumers and other communications service providers. Further
information is available at www.qwest.net.
Lehman Brothers Inc. acted as financial advisor to LCI and Salomon Smith
Barney acted as financial advisor to Qwest.
This release, including the attached merger fact sheet, may contain
forward-looking statements that involve risks and uncertainties. These
statements may differ materially from actual future events or results.
Readers are referred to the documents filed by Qwest with the SEC,
specifically its most recent reports on Form 10-Q, which identify
important risk factors that could cause actual results to differ from
those contained in the forward-looking statements, including potential
fluctuations in quarterly results, dependence on new product development,
delays in closing the transaction, inability to achieve combination
efficiencies, rapid technological and market change, failure to complete
the network on schedule, volatility of stock price, financial risk
management and future growth subject to risks.
This announcement is not an offer to sell or a solicitation to buy any
securities of Qwest. The offering with respect to the proposed merger
with LCI will be made only by the proxy statement/prospectus that will be
distributed to stockholders of LCI in connection with their consideration
of the transaction.
QwestLinked is a trademark, and the Qwest logo is a registered trademark
of Qwest Communications International Inc. in the U.S. and certain other
countries.
###
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Qwest Communications
LCI International
Merger Fact Sheet
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Creates fourth largest long-distance company, as measured by revenues.
(assuming Worldcom and MCI merger is consummated.)
Combined market capitalization exceeds $11 billion, at March 6th trading
prices.
More fully utilizes Qwest's 16,000 mile Macro Capacity sm fiber network.
Combined employee base will be approximately 5,800 (1,800 Qwest and 4,000
LCI).
Combined customer base will be approximately 2.3 million.
Combines the industry's most seasoned and entrepreneurial management
teams.
The combined companies will operate in over 70 U.S. locations (10 Qwest,
60+ LCI), including major operations in Denver, Colorado, Northern
Virginia, Columbus, Ohio and San Antonio, Texas.
Qwest's headquarters will remain in Denver, CO.
Operating synergies will be significant in all areas of operations.
Revenues
Network Facility Costs
Sales and Marketing
Network Engineering and Operations
Information Technology
Other Administration and Corporate
Total cost synergies for the first full year post-combination are
estimated to exceed $300 million and exceed $1 billion for 1998
through 2001.
Capital expenditure synergies are estimated to be approximately
$80 million in 1999 and exceed $285 million for 1998 through 2001.
Presentation includes forward-looking statements. Actual results may
vary.
Key 1997 Operating Data:
Qwest LCI Combined
--------- ----------- -----------
Revenues
Communications services $115.3 $1,642.0 $1,757.3
Construction services $581.4 $0.0 $581.4
Total Revenues $696.7 $1,642.0 $2,338.7
Revenue Growth ('97 v. '96) 202% 26%
Ebitda<F1> $115.2 $194.0 $309.2
Ebitda Growth<F1> ('97 v. '96) 507% 29%
Net Income<F2> $14.5 $97.0 $111.5
Net Income Growth<F2> 308% 30%
('97 v. '96)
Total Assets $1,390.0 $1,354.0 $2,744.0
Minutes of Use 669.2 12,903.0 13,572.2
Minutes of Use Growth 75% 35%
('97 v. '96)
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<FN>
<F1>Adjusted for Qwest Growth Shares
<F2>Adjusted for LCI non-recurring charges
Post Acquisition Stock Ownership:
36.4% LCI pro forma ownership of combined entity based on March 6, 1998
closing stock price.