Qwest closing in on partnership deals – Analysts: Ventures would expand video and wireless services

Qwest Communications is closing in on deals that would expand the Denver telco’s wireless and video offerings, analysts and others have been told.

By Jeff Smith, Rocky Mountain News

Sprint PCS is the likely cellular- phone partner, while Littleton- based EchoStar is expected to become a partner in distributing video and high-speed Internet services, according to a source close to Qwest.

That source and analyst Pat Comack of Guzman & Co. in Miami have been told recently that one or both deals could be announced within a week or two. Comack said no specific companies were named to him.

It wasn’t clear exactly how the deals would be structured.

Qwest has been in discussions with various companies for months on ways to expand its bundle of telecommunications products and services.

In March, the Rocky Mountain News reported that Qwest was investigating possible opportunities with the satellite-TV companies EchoStar and Hughes’ DirecTV.

In April, it was reported that Qwest had been talking about leasing wireless network capacity from either Sprint or Verizon, which both have national networks.

Qwest now has a regional cellular- phone network incapable of attracting the growing number of Americans who want national coverage. Qwest’s video offerings are limited primarily to video-over-telephone- wire offerings in Phoenix and Highlands Ranch.

Qwest spokeswoman Rebecca Tennille said Thursday that Qwest has nothing to announce at this time on either a wireless or video venture.

Sprint spokesman Dave Mellin said Sprint doesn’t comment about rumor and speculation, "which is what this is at this point."

EchoStar didn’t immediately comment.

Telecommunications analyst Tom Friedberg of Janco Partners in Greenwood Village said he also expects a wireless deal to be announced soon.

Friedberg characterized Sprint as the most logical candidate because of similar technology and products, but added that Verizon and Alltel could be long shots.

As for video, EchoStar is by "far the more likely candidate," Friedberg said.

Susan Kalla, a telecommunications analyst for New York-based Friedman Billings, Ramsey, said she hadn’t heard any specific information about either deal, but questioned the wisdom of the moves.

Kalla said that forming a partnership with Sprint would be an admission of weakness by both companies and goes against the human nature of executives wanting full control. She said the only reason Qwest has just a regional wireless franchise is that it didn’t allocate the resources necessary to build a national network.

Now, of course, Qwest doesn’t have the money to do so.

As for the video deal, "EchoStar wouldn’t be a surprise," Kalla said.

She noted that Baby Bell SBC Communications has tried similar things. SBC signed marketing alliances with both EchoStar and DirecTV that combined satellite-television offerings with SBC’s high- speed DSL Internet access. Consumers who took advantage of the offerings received discounts.

But Kalla said she has never understood the "synergy" of such alliances. "The problem is not so much getting distribution, but the content. (Qwest) would be better off teaming with a content provider that needs (video) distribution" through Qwest.

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