Exhibit 99.1 QWEST COMMUNICATIONS INTERNATIONAL INC. PRO FORMA COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) The unaudited pro forma financial statements presented below are derived from the historical consolidated financial statements of Qwest Communications International Inc. (the "Company"), SuperNet, Inc., a Colorado Corporation ("SuperNet"), and Phoenix Network, Inc., a Delaware Corporation ("Phoenix"). The unaudited pro forma balance sheet as of September 30, 1997 gives pro forma effect to: (i) the acquisition by the Company of all issued and outstanding shares of capital stock, and capital stock issued at the closing of the acquisition in October 1997, of SuperNet; (ii) the proposed acquisition by the Company of all the issued and outstanding shares of capital stock of Phoenix (collectively the "acquisitions"); and (iii) the issuance of $555,890,000 aggregate principal amount at maturity of 9.47% Senior Discount Notes (the "9.47% Notes") as if the acquisitions and the issuance of the 9.47% Notes had occurred on September 30, 1997, and as adjusted to reflect the issuance of $450,505,000 aggregate principal amount at maturity of 8.29% Senior Discount Notes (the "Notes") as if the issuance of the Notes had occurred on September 30, 1997. The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 1997 and for the year ended December 31, 1996 give pro forma effect to the acquisitions as if they had occurred on January 1, 1996. There are no pro forma operating statement effects of the 9.47% Notes or the Notes since they have been issued to fund the future construction and activation of the Qwest Network. Further, primarily all interest expense attributable to these notes will be capitalized as a cost of constructing the Qwest Network. The unaudited pro forma financial statements give effect to the acquisitions described above under the purchase method of accounting and are based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma financial statements presented on the following pages. The allocations of the total purchase price for the acquisitions presented are based on preliminary estimates and are subject to final allocation adjustments. The unaudited pro forma financial statements do not purport to represent what the Company's results of operations or financial condition would have actually been or what operations would be if the transactions that give rise to the pro forma adjustments had occurred on the dates assumed. QWEST COMMUNICATIONS INTERNATIONAL INC. PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1997 (AMOUNTS IN THOUSANDS) HISTORICAL ----------------------------------- PRO FORMA PRO FORMA PRO FORMA AS QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED ADJUSTED(16) ----------- ----------- ----------- ----------- ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents........... $186,731 38 1,068 (20,100)(3) $ 510,337 $ 809,537 342,600 (5) Accounts receivable, net................... 64,719 626 12,165 77,510 77,510 Costs and estimated earnings in excess of billings.............. 164,986 -- -- 164,986 164,986 Deferred commissions... 475 (475)(9) -- -- Deferred income tax asset................. -- 325 -- (325)(6) -- -- Notes and other receivables........... 14,936 -- -- 14,936 14,936 Other current assets... 7,063 116 476 7,655 7,655 -------- ------ ------- ------- ---------- ---------- Total current assets... 438,435 1,105 14,184 321,700 775,424 1,074,624 Property and equipment, net.................... 444,816 2,928 6,228 453,972 453,972 Deferred commissions.... 145 (145)(9) -- -- Customer acquisition costs, net............. 1,608 1,608 1,608 Deferred income tax asset.................. 8,902 -- -- 8,902 8,902 Notes and other receivables............ 115 -- -- 115 115 Intangible and other long-term assets, net.. 16,210 -- 18,800 19,574 (6) 77,368 78,168 15,385 (7) 7,399 (8) -------- ------ ------- ------- ---------- ---------- Total assets........... $908,478 4,033 40,965 363,913 $1,317,389 $1,617,389 ======== ====== ======= ======= ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses...... $178,676 1,315 17,208 500 (4) $ 197,699 197,699 Bank line of credit.... -- 600 4,678 5,278 5,278 Deferred revenue....... 4,044 462 4,506 4,506 Billings in excess of costs and estimated earnings.............. 12,440 12,440 12,440 Deferred income tax liability............. 6,432 6,432 6,432 Current portion of long-term debt........ 15,782 306 840 16,928 16,928 -------- ------ ------- ------- ---------- ---------- Total current liabilities........... 217,374 2,683 22,726 500 243,283 243,283 Long-term debt.......... 268,946 454 1,704 349,999 (5) 621,103 921,103 Deferred income tax liability.............. -- 45 -- 45 45 Other liabilities....... 53,307 -- -- 4,000 (4) 57,307 57,307 -------- ------ ------- ------- ---------- ---------- Total liabilities...... 539,627 3,182 24,430 354,499 921,738 1,221,738 -------- ------ ------- ------- ---------- ---------- Stockholders' equity: Preferred stock........ -- -- -- -- -- Common stock........... 1,033 1 30 5 (4) 1,038 1,038 (1)(10) (30)(11) Additional paid-in capital................ 412,005 4,514 52,218 26,795 (4) 438,800 438,800 (4,514)(10) (52,218)(11) Treasury stock.......... (2) 2 (11) Accumulated deficit..... (44,187) (3,664) (35,711) 3,664 (10) (44,187) (44,187) 35,711 (11) -------- ------ ------- ------- ---------- ---------- Total stockholders' equity................ 368,851 851 16,535 9,414 395,651 395,651 -------- ------ ------- ------- ---------- ---------- Commitments and contingencies Total liabilities and stockholders' equity.. $908,478 4,033 40,965 363,913 $1,317,389 $1,617,389 ======== ====== ======= ======= ========== ========== See accompanying notes to unaudited pro forma combined financial statements. QWEST COMMUNICATIONS INTERNATIONAL INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) HISTORICAL ----------------------------------- PRO FORMA PRO FORMA QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Revenue: Carrier services...... $ 39,062 -- -- $ 39,062 Commercial services... 38,033 5,128 59,932 103,093 -------- ----- ------ ------ -------- 77,095 5,128 59,932 142,155 Network construction services............. 413,226 -- -- 413,226 -------- ----- ------ ------ -------- 490,321 5,128 59,932 555,381 -------- ----- ------ ------ -------- Operating expenses: Telecommunications services............. 65,310 2,624 43,942 111,876 Network construction services............. 282,472 -- -- 282,472 Selling, general and administrative....... 59,987 1,950 20,010 (765)(9) 81,182 Growth share and stock option plans......... 69,320 341 -- 69,661 Depreciation and amor- tization............. 13,114 586 2,961 2,936 (12) 20,404 807 (13) -------- ----- ------ ------ -------- 490,203 5,501 66,913 2,978 565,595 -------- ----- ------ ------ -------- Income (loss) from oper- ations................. 118 (373) (6,981) (2,978) (10,214) Other (expense) income: Gain on sale of contract rights...... 9,296 -- -- 9,296 Interest expense, net.................. (2,974) (98) (797) (210)(14) (4,079) Other (expense) in- come, net............ (1,986) -- -- (1,986) -------- ----- ------ ------ -------- Income (loss) before income tax expense (benefit)............ 4,454 (471) (7,778) (3,188) (6,983) Income tax expense (ben- efit).................. 2,191 (3) -- 222 (15) 2,410 -------- ----- ------ ------ -------- Net income (loss)... $ 2,263 (468) (7,778) (3,410) $ (9,393) ======== ===== ====== ====== ======== Net income (loss) per share.................. $ 0.02 $ (0.10) ======== ======== See accompanying notes to unaudited pro forma combined financial statements. QWEST COMMUNICATIONS INTERNATIONAL INC. PRO FORMA COMBINED STATEMENT OF OPERATIONS TWELVE MONTHS ENDED DECEMBER 31, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION) HISTORICAL ----------------------------------- PRO FORMA PRO FORMA QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Revenue: Carrier services...... $ 57,573 -- -- $ 57,573 Commercial services... 34,265 5,542 99,307 139,114 -------- ------ ------- ------ -------- 91,838 5,542 99,307 196,687 Network construction services............. 139,158 -- -- 139,158 -------- ------ ------- ------ -------- 230,996 5,542 99,307 335,845 -------- ------ ------- ------ -------- Operating expenses: Telecommunications services............. 80,368 2,994 73,439 156,801 Network construction services............. 87,542 -- -- 87,542 Selling, general and administrative....... 45,755 2,011 33,817 (1,718)(9) 79,865 Growth share and stock option plans......... 13,100 3,500 -- 16,600 Depreciation and amortization......... 16,245 563 4,358 3,915 (12) 26,272 1,191 (13) -------- ------ ------- ------ -------- 243,010 9,068 111,614 3,388 367,080 -------- ------ ------- ------ -------- Loss from operations.... (12,014) (3,526) (12,307) (3,388) (31,235) Other (expense) income: Gain on sale of telecommunications service agreements... 6,126 -- -- 6,126 Interest expense, net.................. (4,373) (84) (541) (280)(14) (5,278) Other (expense) income, net.......... 60 -- 4 64 -------- ------ ------- ------ -------- Loss before income tax benefit........ (10,201) (3,610) (12,844) (3,668) (30,323) Income tax expense (benefit).............. (3,234) (191) -- 799 (15) (2,626) -------- ------ ------- ------ -------- Net loss............ $ (6,967) (3,419) (12,844) (4,467) $(27,697) ======== ====== ======= ====== ======== Net loss per share...... $ (0.08) $ (0.31) ======== ======== See accompanying notes to unaudited pro forma combined financial statements. QWEST COMMUNICATIONS INTERNATIONAL, INC. NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) (1) On September 30, 1997, the Company entered into a Stock Purchase Agreement with NEWSUPERNET, a Colorado nonprofit corporation and the sole shareholder of SuperNet, for all the issued and outstanding shares of capital stock, and capital stock issued at the closing of the acquisition of SuperNet. For accounting purposes the acquisition will be accounted for using the purchase method of accounting. The fair value of the cash consideration will be allocated to the assets and liabilities acquired based upon the estimated fair values of such assets and liabilities. The estimated fair values of the assets and liabilities acquired, as reflected in the accompanying unaudited pro forma financial statements, is based upon information available at the date of preparation of these unaudited pro forma financial statements, and will be adjusted upon the final determination of such fair values. (2) In January 1998 the Company, its newly-formed wholly owned subsidiary Qwest 1997-5 Acquisition Corp. ("Qwest Subsidiary"), and Phoenix entered into the Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, Qwest Subsidiary will merge with and into Phoenix (the "Merger"), with Phoenix being the surviving corporation of the Merger. Immediately prior to the Merger, each outstanding share of Phoenix Series I Stock will be converted into shares of Phoenix Common Stock. In the Merger, each outstanding share of Phoenix Common Stock (including shares of Phoenix Common Stock issued upon conversion of the Phoenix Series I Stock) will be acquired for that many shares of Qwest Common Stock having an aggregate market value equal to $28.5 million, reduced by certain adjustments and limitations to $26.8 million ("Common Stock Consideration"), and future payments of $4 million. The proposed acquisition is subject to certain closing conditions that include requisite shareholder approval. For accounting purposes the proposed acquisition will be accounted for using the purchase method of accounting. The fair value of the consideration will be allocated to the assets and liabilities acquired based upon the estimated fair values of such assets and liabilities. The estimated fair values of the assets and liabilities acquired, as reflected in the accompanying unaudited pro forma financial statements, is based upon information available at the date of preparation of these unaudited pro forma financial statements, and will be adjusted upon the final determination of such fair values. (3) Represents the purchase by the Company of SuperNet's outstanding capital stock and capital stock issued at the closing of the acquisition and the incurrence of related transaction costs. Additional information regarding the aggregate purchase price is set forth below (amounts in thousands): Cash consideration paid for all the issued and outstanding capital stock of SuperNet................................................. $15,900 Cash consideration paid for the capital stock issued at the closing of the acquisition................................................ 4,100 Estimated direct costs of the acquisition.......................... 100 ------- Aggregate purchase price to be allocated to net assets acquired.... $20,100 ======= QWEST COMMUNICATIONS INTERNATIONAL, INC. NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED) (4) Represents the purchase by the Company of Phoenix's outstanding capital stock and the incurrence of related transaction costs. Additional information regarding the aggregate purchase price is set forth below (amounts in thousands): Aggregate value of the Common Stock Consideration................... $26,800 Future payments..................................................... 4,000 Estimated direct costs of the acquisition........................... 500 ------- Aggregate purchase price to be allocated to net assets acquired..... $31,300 ======= (5) Represents the issuance of the 9.47% Notes. The 9.47% Notes were issued at a price of 62.962% of their principal amount at maturity, representing a yield to maturity of 9.47% and yielding gross proceeds to the Company of approximately $350 million. The 9.47% will mature on October 15, 2007. (6) Represents the increase to SuperNet's intangible assets to reflect the preliminary allocation of the purchase price. The increase to SuperNet's intangible assets represents the excess of the purchase price over the identifiable net tangible assets of SuperNet and the establishment of a valuation allowance for SuperNet's deferred tax assets. Such intangible assets are assumed to be primarily associated with the customer base, trademarks, and goodwill of SuperNet, and, for pro forma purposes, have been amortized over an assumed weighted average life of five years. The actual purchase price allocation that will be made may differ from such assumptions, and the actual lives assigned to the intangible assets may differ from the assumed weighted average life used in preparing the pro forma financial statements. (7) Represents the increase to Phoenix's intangible assets to reflect the preliminary allocation of the purchase price. Such intangible assets are assumed to be primarily associated with the customer base, trademarks, and goodwill of Phoenix, and, for pro forma purposes, have been amortized over an assumed weighted average useful life of fifteen years. The actual purchase price allocation that will be made may differ from such assumptions, and the actual useful lives assigned to the intangible assets may differ from the assumed weighted average useful life used in preparing the pro forma financial statements. (8) Represents deferred issuance costs related to the 9.47% Notes. (9) Represents the reduction to deferred commissions and the associated amortization to selling, general and administrative expenses to conform with the Company's policy to expense sales commissions as incurred. Phoenix had capitalized certain sales commissions, all of which had been incurred prior to 1996. (10) Represents the elimination of the historical equity of SuperNet. (11) Represents the elimination of the historical equity of Phoenix. (12) Represents the amortization of the intangible assets that results from the preliminary SuperNet purchase price allocation. Such amortization is calculated using an estimated weighted average life of five years. See note 6. QWEST COMMUNICATIONS INTERNATIONAL, INC. NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) (13) Represents the amortization of the intangible assets that results from the preliminary Phoenix purchase price allocation. Such amortization is calculated using an estimated weighted average useful life of 15 years. See note 7. (14) Represents interest expense on the future payments related to the Phoenix acquisition at 7% per annum. (15) Represents the assumed income tax effect of the pro forma adjustment relating to interest expense and deferred commissions. The other pro forma adjustments are not expected to have an income tax impact because substantially all of the excess purchase price has been assumed to be goodwill. (16) Represents the issuance of the Notes. The Notes were issued at a price of 66.592% of their principal amount at maturity, representing a yield to maturity of 8.29% and yielding gross proceeds to the Company of approximately $300 million. The Notes will mature on February 1, 2008. Offering costs of approximately $800,000 are included in intangible and other long-term assets. (17) Transactions among the Company, SuperNet and Phoenix are not significant.