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Verizon in Talks with Qwest on Wireless Deal

Thu, 02/28/2008 - 11:17am
Qwest Communications International Inc. has discussed a potential partnership with Verizon Wireless, Verizon Communications Inc. confirmed on Wednesday, showing Qwest may dissolve its partnership with Sprint Nextel Corp. Qwest said on Monday it was working on a new kind of wireless partnership because its current arrangement to resell Sprint's services is inadequate.

Qwest has had a decline in sales of traditional phone lines and, unlike rivals Verizon and AT&T Inc., does not have a wireless unit to compensate. Its partnership to resell Sprint services limits Qwest's profit margins. The Wall Street Journal earlier reported that Verizon Chief Executive Ivan Seidenberg said his company, which owns Verizon Wireless in a joint venture with Vodafone Group, has held talks with Qwest about a possible deal. Verizon confirmed those comments were made to some analysts after a Merrill Lynch conference on Tuesday.

Analysts have said Qwest is likely talking to a number of carriers, although there is still a chance it will renegotiate its Sprint contract, which expires in early 2009.

One analyst said Verizon is well-positioned to replace Sprint. "Initially, the deal would represent the current 824,000 Qwest wireless subs, but should expand over time," said Tom Watts, analyst at Cowen & Co in a client note. He added that a deal could offset losses in wireline customers with Verizon Wireless' unlimited calling plan. Verizon and Sprint both use the same wireless technology standard known as CDMA, which could make a possible transition easier for Qwest customers.

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