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Qwest has high IPO hopes
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June 24, 1997: 3:30 p.m. ET
Company building new fiber-optic network to offer latest data services
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NEW YORK (CNNfn) - With the "communications race" in full swing, a number of companies are jumping out of the gate, taking aim both at the existing long distance and local telephone companies and offering new data services.
Among those is Denver-based Qwest Communications. The communications services company went public Tuesday on the Nasdaq Stock Market at $22.50 a share, hoping to raise $270 million.
Qwest Communications Chief Executive Officer Joseph Naccio appeared Tuesday on CNNfn's "Before Hours" with anchor Deborah Marchini to talk about his company's IPO, the 13,000-mile coast-to-coast fiber optic network Qwest has under construction and new services on the horizon.
The following is a transcript of their conversation:
MARCHINI: Despite Monday's sharp fall on Wall Street, your stock was priced at $22.50 a share, which was very much at the high end of the range. Did that surprise you?
NACCHIO: Well, yes, it was actually above the range, and I think it surprised us a little bit. But, of course, we're very bullish on the company, and we're glad the investors seem to be too right now.
MARCHINI: Why do we need another trans-continental telephone, information carrier?
NACCHIO: Well, what you've got is an explosive demand of broadband data occurring in this country as a result of all the improvements in not only microchip technology in PCs but certainly the Internet, and intranets. We believe there'll be not only a capacity shortage, but we believe there's a new type of network that is required to raise reliability and service levels for this world of high speed data, and that's what we're building at Qwest.
MARCHINI: Who are your customers, and who are your competitors? I see that you're selling some of this fiber-optic system to people I would think of as competitors. GTE, WorldCom for example.
NACCHIO: Well, it was a purposeful strategy of the company to over build, as we call it, the routes we were constructing, and then sell off some of the assets as a way of financing the construction of our own network. We think the demand is so strong in this industry that we're not really worried about the fact that we're providing some of the fiber capacity to people who could potentially be a competitor.
MARCHINI: Are you giving potential competitors something that is just as good as what you say you've got?
NACCHIO: Well, we're not giving them exactly what we have. They're buying some of the dark fiber strand inside of our first cable. We still have the ownership of the two conduit system that we're putting in the ground and the right-of-ways. We also will be departing in terms of the way we both decide to light up the network, in terms of the kind of technology and service platforms that are the next level. So we're not exactly the same, and we have overall control of the system.
MARCHINI: But these folks will be using your lines. What will you be able to give customers that they will not?
NACCHIO: Well, I think that's a question of the service line we'll develop. I think what we'll be bringing to customers is a much higher, more reliable level of high-quality and high-speed data services than they currently can get. And I think for the average customer, also, this new technology allows us to lower the whole cost floor of the inter-city long distance market. So everyone will get that benefit, whether they're using voice services or high speed data.
MARCHINI: You're going very high-tech here, yet you claim you can lower prices. Isn't fiber-optic cable very expensive?
NACCHIO: Well, remember, we're talking about the fourth generation of fiber-optic cable and multiple generations of developments on the optical electronics since the first fiber networks were actually designed and deployed in the late 1980s. So we're basically riding a technology price-performance curve down. And the benefits of that technology will be realized by our customers.
MARCHINI: The $270 million or so that you're going to raise with this offering -- is that going to pay for this fiber-optic cable, or do you have other things in mind for it?
NACCHIO: This initial public offering is to raise the balance of the funds required to complete the construction of our 13,000-mile network.
MARCHINI: You are formerly of AT&T . Now, not quite a year later, you're out to compete with them. What do you think you can give customers that AT&T can't?
NACCHIO: Well, I think AT&T is a great company, but again I think Qwest is playing a new technology strategy. I think we will lower the cost, we will build a network of the highest quality and reliability of any of the existing networks. It's designed for high speed data. I think we will actually find AT&T potentially to be a very good customer of ours in the wholesale market, which is one of the key markets we're going to serve. 
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