Qwest-US West merger clears Justice Department scrutiny

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— The proposed purchase of Baby Bell phone company US West by Qwest Communications has cleared another regulatory hurdle with the Justice Department raising no antitrust objections.

The $35 billion deal, recently cleared by the Securities and Exchange Commission, still faces scrutiny by the Federal Communications Commission and states in the Rocky Mountain and Pacific Northwest where US West sells local phone service.

The Justice Department said Tuesday it has completed a mandatory federal review of the deal's impact on competition and that no further action is planned.

Qwest agreed to acquire US West in July after outbidding Global Crossing, another company that's building a global fiber-optic network for Internet, telephone and TV service.

The FCC could block the deal because Qwest sells long-distance phone service and Baby Bells like US West are currently prohibited from entering that business in the regions they monopolize.

The Baby Bells need to persuade regulators they have opened their markets to local phone competition before they can enter the long-distance business in those markets.

While US West may satisfy those requirements in some states soon, Qwest is trying to avoid any conflict by offering to sell its long-distance business in US West's 14-state territory.

The merger also may face tough scrutiny from states that have accused US West of providing the worst service among the Baby Bells created by the 1984 breakup of AT&T.

State regulators also may demand that Qwest share the financial benefits the merger with local phone customers.

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