-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jf+Zzx9wnpL2WFjuvlg0OSOyfel1WyYgB0mO2YYGTWsQlL6zBTTuXbbuimy3a2Vh Qwl5wuHgMrmsrbnsA70lXA== 0000893750-99-000258.txt : 19990624 0000893750-99-000258.hdr.sgml : 19990624 ACCESSION NUMBER: 0000893750-99-000258 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990516 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S WEST INC /DE/ CENTRAL INDEX KEY: 0001054522 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840953188 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14087 FILM NUMBER: 99634771 BUSINESS ADDRESS: STREET 1: 1801 CALIFORNIA STREET STREET 2: SUITE 390 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036722700 MAIL ADDRESS: STREET 1: 1801 CALIFORNIA STREET STREET 2: SUITE 390 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: USW-C INC DATE OF NAME CHANGE: 19980204 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) May 16, 1999 ____________ U S WEST, Inc. (Formerly "USW-C, Inc.") ________________________________________________________ (Exact Name of Registrant as Specified in Charter) Delaware 1-14087 84-0953188 ____________________________ ___________ ___________________ (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 1801 California Street, Denver, Colorado 80202 ________________________________________________________________________________ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (303) 672-2700 ______________ USW-C, Inc. ________________________________________________________________________________ (Former Name or Former Address, if Changed Since Last Report) Item 5. Other Events. As previously announced, on May 16, 1999, Global Crossing Ltd., a Bermuda company ("Global Crossing"), and U S WEST, Inc., a Delaware corporation (" U S WEST"), entered into an Agreement and Plan of Merger, dated as of May 16, 1999 (the "Merger Agreement"). A copy of a Q&A presentation, dated May 25, 1999 relating to the transactions contemplated by the Merger Agreement (the "Q&A Presentation") is attached hereto as Exhibit 99 and is incorporated herein by reference. Item 7. Exhibits. The following exhibit is filed as part of this Current Report on Form 8-K: Exhibit Number Exhibit - ---------------- ------- 99 Q&A Presentation SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. US WEST, Inc. (Formerly "USW-C, Inc.") (Registrant) /s/ Thomas O. McGimpsey ____________________________ Thomas O. McGimpsey Assistant Secretary Date: May 26, 1999 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99 Q&A Presentation EX-99 2 Investor Q&A ------------ The Merger 1. Explain the sequence of events in the U S WEST / Global Crossing merger. On Sunday, May 16, Global Crossing and U S WEST agreed to merge in a merger of equals in which the shareholders of Global Crossing (including the former shareholders of Frontier Corporation) and the shareholders of U S WEST will exchange their shares of Global Crossing and U S WEST for "tracking stock" in the combined entity. The combined entity will issue two classes of tracking stock: Class A or "LSP Stock", which is intended to reflect the performance of the combined entity's Local Service Provider group ("LSP"), and Class B or "GSP Stock", which is intended to reflect the performance of the combined entity's Global Service Provider group ("GSP"). Prior to the closing of the Global Crossing/U S WEST merger, shareholders of Global Crossing and U S WEST will be mailed forms to make an election as to their preferred allocation between GSP Stock and LSP Stock. Following the closing of the Global Crossing/U S WEST merger, shareholders of both companies will receive GSP Stock and LSP Stock based on their election, subject to pro ration if either GSP Stock or LSP Stock is oversubscribed. It is anticipated that the Global Crossing / U S WEST merger will close in mid-2000 following receipt of regulatory approvals. See Exhibit 1 for a chronological summary of the key events affecting the merger. Tender Offer 2. Describe the terms of the tender offer. On May 21, 1999, U S WEST commenced a tender offer for approximately 9.5% of Global Crossing's outstanding shares, or 39,259,305 shares (subject to pro ration) in the aggregate, for $62.75 per share in cash. The tender price was negotiated as part of the overall merger transaction based on the recent trading history of Global Crossing and represents a 2.2% premium to Global Crossing's closing price on May 14, 1999, the last trading day prior to the announcement of the merger. The tender offer will remain open for 20 business days (until Friday, June 18, 1999), unless extended. Following the merger, the Global Crossing shares purchased by U S WEST in the tender offer will be canceled. 3. Why is U S WEST purchasing 9.5% of Global Crossing? Why is U S WEST paying a premium? U S WEST believes that establishing an immediate strategic relationship with Global Crossing provides significant benefits to U S WEST's business strategy. The minority investment in Global Crossing will cement the alliance between the companies, establishing a foundation for an ongoing strategic relationship. U S WEST expects to combine its investment in Global Crossing with transport arrangements, -2- out-of-region DLEC opportunities and data joint ventures that will provide both companies with incremental revenues and profitability prior to the closing of the merger. U S WEST's investment in Global Crossing was the result of an arm's length negotiation and was part of the negotiations of the overall terms of the merger. 4. Will Global Crossing's major shareholders participate in the tender? The tender offer is open to all of Global Crossing's shareholders. However, in order to provide an opportunity for enhanced public participation, Global Crossing's founder, Chairman, and largest shareholder, Gary Winnick, and other senior executives (including Bob Annunziata, Abbott Brown, Tom Casey, Dan Cohrs, Lodwrick Cook, James Gorton, David Lee, Barry Porter, and Jack Scanlon) will tender no more than 30% of the eligible shares held by them or by the institutions they represent. Other Global Crossing Directors will tender no more than 50% of the shares held by them or by the institutions they represent. All other Global Crossing shareholders will have the right to tender 100% of the eligible shares held by them. To the extent that more than 39,259,305 Global Crossing shares are tendered, each Global Crossing shareholder that tenders will be pro rated. -3- Assuming all shareholders tender all of their eligible shares into the offer, Mr. Winnick and the senior executives will retain approximately 95% of their total holdings, and the Global Crossing Directors and the institutions they represent will retain in excess of 91% of their total holdings. As a result of the voluntary restrictions by insiders, all other Global Crossing shareholders will be able to sell at least 17% of their holdings in the tender, if they desire. As noted above, as part of the agreements concerning the tender offer, Canadian Imperial Bank of Commerce, Continental Casualty Corp., MRCo (an affiliate of Union Labor Life Insurance Co.), or their affiliates, and the individual founders and executives on Global Crossing's Board, which in aggregate represent approximately 78% of the equity of Global Crossing, have agreed not to sell their shares without Global Crossing's consent until Global Crossing's merger with Frontier has been completed. Operational Benefits of the Transaction 5. Why have U S WEST and Global Crossing chosen each other as partners? The merger between U S WEST and Global Crossing will accelerate the strategic development of both companies. Though we operate in related but separate lines of business, we share the same vision for the future. Global scale, end-to-end connectivity and full product suites will be key success factors in the new -4- telecommunications paradigm. To compete effectively, U S WEST would benefit from expanding its business reach to the major markets of the world. The Global Crossing network is a premier vehicle that U S WEST can use to establish a presence in every major world market. Its U.S. fiber optic network opens up a low cost, high capacity means for the combined company to compete for both data and voice traffic. DLEC service roll-out can enhance the existing 35-city CLEC operation, and other data services will enjoy faster, less expensive deployment using the fiber networks. From Global Crossing's perspective, U S WEST's 16 million access lines provide not only incremental traffic for Frontier's and Global Crossing's networks (post approval pursuant to Section 271 of the Telecommunications Act of 1996 ("Section 271")), but also customer relationships that Global Crossing can utilize to sell higher margin data services and international connectivity. In addition, our combined data expertise and financial resources provide for an accelerated roll-out of advanced data services on our combined networks. 6. Explain the sources and amounts of synergies generated by the transaction, both short and long term. The combination of U S WEST with Global Crossing will allow us to offer a more robust, broader suite of services to our customers than either company could have offered on its own. In addition, we will be able to utilize our local, national -5- and global infrastructure and experience in developing value-added, customer-oriented communications solutions to enhance our ability to compete for the business of large multinational corporate customers. Anticipated other incremental synergies resulting from the merger include: Synergy Opportunity Operating Efficiencies Opportunity to reduce corporate administrative functions that are duplicative between U S WEST and Frontier In-Region Long Distance Faster market penetration Global 1 Hop E-commerce, hosted commercial applications with data centers deployed domestically and interconnected via a wholly-owned, state-of-the-art global fiber optic network In connection with the merger, Global Crossing will become a U.S. corporation and, accordingly, will be subject to a higher level of U.S. taxes. We have also identified market opportunities that we expect will produce substantial additional value as a result of the merger. Opportunities to create new revenue in managed data network services, Internet access, web hosting and application services, and national CLEC and DLEC offerings, as well as international services could have a substantial net present value. -6- 7. Is there the potential for conflicts with the co-CEO structure? We believe the co-CEO structure is a significant strength, taking full advantage of the shared vision and complementary backgrounds and strengths of Sol Trujillo and Bob Annunziata in the context of a dynamic, global business. Our management teams found while planning this merger that they work well together, and they have gained great respect for each other's knowledge and capabilities. Importantly, the new CEOs share a common vision of the need for global connectivity, strong, data-centric vertical services and sufficient scale to be a strong competitor in this rapidly changing industry. Both sides are excited about the opportunities that lie ahead of the new Global Crossing. 8. How will the transaction affect U S WEST's level of investment in VDSL and other growth initiatives? The merger of Global Crossing and U S WEST should enhance our ability to accelerate the development of VDSL and other growth initiatives, such as DSL, both within and outside of U S WEST's service territory. The rapid national and global introduction of these and other initiatives should significantly benefit shareholders of both LSP and GSP. 9. What is the acquisition strategy going forward? We believe that acquisitions are an important means of acquiring, in a timely manner, assets, resources and expertise we do not -7- currently possess. Both companies will continue to individually evaluate acquisitions between signing and closing of the merger. Given our shared vision, we expect to be able to agree on the financial and strategic merits of acquisition candidates. In the interim prior to closing, however, each of Global Crossing and U S WEST will limit its acquisitions to $3.0 billion (over those that have been previously announced) in aggregate consideration (debt plus equity) without requiring the other party's consent. Once the merger is closed, we will be positioned to generate significant growth using our existing platform even without any further acquisitions. However, we may selectively seek value-enhancing acquisitions that will augment our position as a global communications company offering a complete suite of services to a national and international customer base. Like acquisitions prior to the merger, selected future acquisitions may be financed with debt or equity, or both. Merger Transaction 10. Explain the exchange ratio. In the Global Crossing/U S WEST merger, the exchange ratio will be "fixed" to ensure that U S WEST shareholders and Global Crossing shareholders (including the former Frontier shareholders) will each have approximately 50% ownership in the combined entity. The exchange ratio has not been fixed yet, because the number of Global Crossing shares that will be outstanding -8- cannot be determined until after the Global Crossing/Frontier merger closes. Assuming the minimum number of Global Crossing shares are issued in the Frontier merger, the exchange ratio will be approximately 1.21. Assuming that the maximum number of Global Crossing shares are issued in the Frontier merger, the exchange ratio will be approximately 1.46. The exchange ratio will determine the number of Election Rights (rights to acquire GSP Stock and LSP Stock) that each shareholder of U S WEST and Global Crossing will receive. 11. Explain what a U S WEST or Global Crossing shareholder will receive in the transaction. Each shareholder of U S WEST and Global Crossing will receive GSP Stock, LSP Stock, or a combination of both. Assuming an exchange ratio of 1.21, a Global Crossing shareholder will receive 1.00 Election Right for each Global Crossing share held and a U S WEST shareholder will receive 1.21 Election Rights for each U S WEST share held. Thus, each U S WEST shareholder will receive Election Rights which entitle it to a package of value (GSP Stock, LSP Stock, or a combination of both) per U S WEST share held that is 1.21 times the package of value (GSP Stock, LSP Stock, or a combination of both) per Global Crossing share that each Global Crossing shareholder will receive. Investment bankers will appraise the relative values of the GSP Stock and the LSP Stock (see Question 15), and, following the appraisal, each shareholder will choose the -9- mix of LSP Stock and GSP Stock that he would like to receive. Because the per share values of GSP Stock and LSP Stock may be different, the merger agreement contains formulas which are designed to ensure that each shareholder receives an equal package of value per Election Right, whether he selects all GSP Stock, all LSP Stock, or a combination of both. The number of shares of GSP Stock and LSP Stock ultimately issued to each shareholder will be subject to pro ration if there is an oversubscription for either GSP Stock or LSP Stock (see Exhibits 4-6 for examples). 12. How will the Frontier/Global Crossing collar impact the exchange ratio? The exchange ratio for the Global Crossing/U S WEST merger cannot be fixed until the number of shares that Global Crossing will be required to issue to Frontier shareholders can be determined. Global Crossing's acquisition of Frontier was structured with a "collar" on Global Crossing's share price. The collar requires that the number of shares Global Crossing issues to Frontier will decrease if Global Crossing's share price appreciates (up to $56.78) and increase if Global Crossing's share price declines (down to $34.56). The Frontier "collar" mechanism provides U S WEST shareholders with a degree of downside protection since the Global Crossing/U S WEST exchange ratio will increase, thus producing additional Election Rights for U S WEST shareholders, to the extent that Global Crossing issues more shares pursuant to the -10- Frontier collar. Assuming the minimum number of Global Crossing shares are issued in the Frontier merger, the U S WEST exchange ratio would be approximately 1.21. Assuming the maximum number of Global Crossing shares are issued in the Frontier merger, the U S WEST exchange ratio would be approximately 1.46. (See Exhibit 7). Tracking Stock Mechanics 13. What is Tracking Stock? Tracking stock provides its holders with the benefit of earnings and dividends (if any) generated by the business that the stock tracks. The holders of LSP Stock will benefit from the earnings and dividends generated by the LSP business, and the holders of GSP Stock will benefit from the earnings and dividends generated by the GSP business. 14. Why was a structure incorporating tracking stock used? The tracking stock structure was designed to provide distinct, attractive investment choices tailored to different shareholders. Through the election mechanism, current U S WEST and Global Crossing shareholders may elect to allocate their interests between GSP Stock and LSP Stock in a tax-free manner. 15. Explain the appraisal process. The purpose of the appraisal process is to ensure that each shareholder receives the same value per Election Right, whether such -11- shareholder elects all GSP Stock, all LSP Stock, or a combination of both. Because the per share value of GSP Stock and LSP Stock may be different the merger agreement contains formulas which are designed to achieve this objective. These formulas require a determination of the value of GSP relative to the value of LSP (the "GSP to LSP Value Ratio"). In order to determine the GSP to LSP Value Ratio, an appraisal of the businesses underlying GSP Stock and LSP Stock must be conducted since the GSP Stock and LSP Stock will not yet have begun to trade. The appraisal process requires each of U S WEST and Global Crossing to retain an investment bank to determine the relative values of GSP and LSP which will then be used to calculate the GSP to LSP Value Ratio. If the two investment banks' estimates are different by more than 10% (measured against the lower estimate), a third investment bank will be retained to provide an estimate. The GSP to LSP Value Ratio will be the average of the third investment bank's estimate and the closer of the original two estimates to the third, provided that the ratio will be no greater than the higher original estimate and no less than the lower original estimate. 16. What are the components of the 2 tracking stocks? How will transfer pricing for transactions between GSP and LSP work? LSP Stock will track all of the local exchange businesses, including private lines and in-region -12- long distance, plus the print Yellow and White Pages directories of the combined company. The GSP Stock will track the new company's undersea and terrestrial fiber optic networks, frame relay and ATM networks, CLEC, DLEC, digital subscriber lines (DSL), wireless operations, Internet Yellow Pages, applications hosting and Internet data distribution business. We currently anticipate that GSP will provide compensation to LSP through fees for local network access, sales, commissions, installation, billing, customer service and repair charges. It is also intended that LSP will receive a transitional licensing fee, estimated to begin at 3% of the portion of GSP revenue earned within the U S WEST service territory. Generally, transactions entered into between the groups following the merger will be at an arm's length basis. To the extent applicable, regulated pricing will apply to transactions between the two entities. 17. Will the tracking stocks trade on a "when-issued" basis so that investors can see the relative values of the shares following the appraisal process? If there is significant demand, the relevant exchanges may provide for when-issued trading. -13- LSP Group 18. Discuss growth opportunities for LSP. We believe that the following will be drivers of growth at LSP: - The strong growth characteristics of U S WEST's service territory, which encompasses six of the ten fastest growing states in the country (Arizona, Colorado, Idaho, Oregon, Utah and Washington), - The receipt of payments from GSP to LSP for services such as local network access, sales, commissions, installation, billing, customer service, and repair which will be incremental revenues to LSP and which are growing significantly faster than LSP's core business, - Increased penetration of existing and new vertical features, and - The introduction of interLATA long distance services upon receiving Section 271 approval. As a result of the merger, we believe there are additional factors that may enhance LSP's growth rate, including: - Additional revenues and profits as a result of the ability for the combined company to more effectively compete for customers by selling an enhanced suite of voice and data products, - Additional sales generated by the combined company's expanded distribution capabilities, - Cost reductions from the combination of certain administrative and other functions, and -14- - The receipt of licensing fees from GSP for the use of brand name, customer goodwill and enhanced product integration capabilities. 19. How will the removal of !NTERPRISE and wireless impact the long-term opportunities of LSP? While the revenue, cash flow, and earnings of !NTERPRISE will now directly benefit GSP shareholders, we believe that LSP will also benefit through its relationship with !NTERPRISE/GSP. GSP will be able to accelerate the roll-out of !NTERPRISE's services nationally and internationally. LSP will benefit directly from the rapid expected growth of GSP through providing services such as local network access, sales, commissions, installation, billing, customer service and repairs, as well as licensing fees for use of the brand name. Finally, we believe that LSP's service offering to business and residential customers will be enhanced, as a result of the stronger suite of products it is able to offer. GSP Group 20. Discuss GSP growth expectations and competitive environment. We believe that GSP, which combines the domestic and global fiber optic networks, data services, Web hosting, wireless and CLEC businesses of U S WEST, Global Crossing and Frontier, will grow more quickly than any of the companies could have on their own. We expect -15- that GSP will be uniquely positioned to take advantage of dramatic global growth in data, Internet, wireless and international traffic. GSP's planned network of 2.85 million fiber miles will carry traffic around the globe to 185 cities, including the major markets of the U.S., Europe, and Japan. This state-of the-art network is being designed as the world's first seamless global data oriented backbone and will provide unparalleled support for advanced data services. The GSP network is specifically configured to carry ATM, frame relay, and IP traffic, making the new Global Crossing a global, one-stop provider for video, data and Internet services. After the Global Crossing/U S WEST merger closes, GSP intends to expand the operations of the individual businesses which comprise it. For example, GSP expects to aggressively pursue a national DSL strategy to take advantage of U S WEST's DSL capabilities and expects to expand its data center business both domestically and internationally to unite the web hosting expertise of GlobalCenter with the applications hosting know-how of U S WEST and the global network of Global Crossing/Frontier. GSP intends to deliver growth by using its state-of-the-art global network and data skills to increase its presence as a global provider of integrated data and voice transport, connectivity and high value-added services to its customers. Moreover, as a global operator, GSP can introduce the web hosting, applications and local -16- data connectivity to its European, Japanese and South American locations. 21. Explain the !NTERPRISE business of U S WEST. Why is it being included in GSP? !NTERPRISE is a U S WEST division that provides high-speed data communications and network services to consumers and businesses inside and outside of U S WEST's 14 state region. Products offered include U S WEST.net (Internet access), MegaBit (high speed Internet access using DSL technology), ATM and frame relay services, network integration solutions and data applications. The !NTERPRISE assets, combined with GSP's domestic and global transport, connectivity and data assets from Global Crossing/Frontier, will allow the combined company to offer advanced data products and services competitively on a national and international basis. The following table highlights the capabilities of GSP which will be a combination of assets from U S WEST, Frontier and Global Crossing: -17- GSP Assets Selected Comparables 115,000 planned route miles of fiber Qwest (a) 29,315 Level 3 (b) 19,500 12 Web hosting/data centers Exodus (c) 9 AboveNet (d) 2 35,000 DSL customers Covad 8,600 NorthPoint (e) 3,600 Rhythms NetConnections 1,235 >200,000 ISP subscribers MindSpring 1,157,000 EarthLink Networks 1,155,000 Prodigy 586,000 @Home 460,000 FlashNet 190,567 Internet America 79,000 220,000 PCS subscribers (f) Sprint PCS 3,350,000 OmniPoint 478,000 Powertel 338,000 Aerial 330,000 GSP will also have 230,000 CLEC access lines, 173 ATM switches, and 454 frame relay switches with over 70,000 frame relay nodes. Note: Data as of 3/31/99. Source: Company press releases. (a) Planned route miles include KPNQwest JV and exclude purchased undersea capacity. (b) Planned route miles exclude announced undersea network. (c) Includes server hosting facility in London. (d) Excludes Network Operation Center (NOC). (e) Source: Company Prospectus dated May 6, 1999. (f) GSP's PCS licenses are 10 MHz bandwidth. !NTERPRISE is an excellent fit with GSP from an operating, strategic, investment, and growth perspective. -18- Transaction Timing and Regulatory Approval 22. Discuss overall transaction timing and expected timing of key events (proxy, shareholder vote, appraisal, distribution of LSP Stock and GSP Stock, etc.). The merger is expected to close in mid-2000. We are in the process of preparing proxy statements and regulatory filings. Based upon advice from regulatory counsel, we believe that all necessary regulatory approvals will be obtained by mid-2000. Global Crossing believes that the Frontier merger will close during the fall of 1999. After completion of the Frontier merger, and after the SEC has reviewed proxy statements relating to the U S WEST / Global Crossing merger, the companies will hold shareholder meetings to approve the transaction. The appraisal process will begin approximately 60 days prior to closing and is expected to require between two and four weeks to complete. Approximately 30 days prior to closing, shareholders will be mailed their election forms to select what percentage of GSP Stock and LSP Stock they would prefer in the combined company, subject to pro ration. At closing, LSP Stock and GSP Stock will be distributed. We intend to notify shareholders of progress towards closing through press releases and/or SEC filings. 23. Provide an assessment of the state and federal regulatory approvals for the transaction. Discuss the in-region competitive environment and current Section 271 status. -19- The merger is subject to regulatory approval. Based upon advice from regulatory counsel, we believe that the transaction should not raise significant regulatory issues. U S WEST has aggressive plans to obtain Section 271 approval in all of its 14 states (granting it the ability to originate long-distance service in-region) and is hopeful of long distance relief through the Section 271 process, or otherwise, within a time frame that will enable it to take advantage of the many opportunities created by the merger. If long distance relief has not been obtained at the time of closing, we will take measures to ensure that the transaction can close consistent with all legal requirements, including Section 271. Financial 24. Is this transaction just providing Global Crossing access to U S WEST's balance sheet? Global Crossing currently enjoys significant access to both the debt and equity markets. It is worth noting that all of Global Crossing's current projects (including AC-1, PC-1, MAC, PAC, PEC and GAL) are already fully financed. 25. What is the impact of purchase accounting from the Frontier / Global Crossing and Global Crossing / U S WEST mergers on reported results of LSP and GSP? It is a condition to closing that U S WEST be the accounting acquiror. Under purchase accounting rules, the net book value of Global -20- Crossing's assets will be increased to reflect their fair market value. Goodwill created in the merger will be allocated between the assets remaining at GSP from Global Crossing and the assets allocated to LSP by Global Crossing. It is expected that the large majority of the goodwill created in the transaction will be allocated to the assets of GSP. U S WEST 26. What dividends will U S WEST be paying from announcement to closing? U S WEST intends to pay a quarterly special dividend of $0.215 per share for a total quarterly dividend of $0.75 per share, beginning August 2, 1999. In addition, the last U S WEST quarterly dividend will be paid proportionately. The quarterly special dividend increases U S WEST's aggregate dividends paid to those anticipated to be paid by LSP. Pursuant to the merger agreement, U S WEST intends to pay a $1.00 per share special cash dividend immediately prior to the closing of the Global Crossing / U S WEST merger. Frontier 27. Discuss the impact of this transaction on the Frontier transaction. The Global Crossing merger with U S WEST should not impact the Frontier acquisition. We believe that Frontier's U.S. fiber optic network can be used to carry traffic generated by 17 -21- million local access lines (post-Section 271 and other long distance approval). Applying the DSL, applications hosting and other data capabilities of U S WEST to segments of Frontier's business (such as GlobalCenter) will also enhance the growth prospects of the combined businesses. 28. Explain the modifications to the Frontier collar. Global Crossing agreed to amend its purchase price for Frontier from $62.00 per share to $63.00 per share if the average price for Global Crossing during the pricing period is within a range of $34.56 to $56.78 per share. As a result, the exchange ratio at the bottom of the collar is increased from 1.0919x to 1.1095x, and the exchange ratio at the top of the collar is increased from 1.7939x to 1.8229x. We currently expect that the Global Crossing/Frontier acquisition will close in the fall of 1999. To the extent the Frontier closing extends beyond December 31, 1999 and Global Crossing is trading within the collar, Global Crossing has agreed to increase the consideration paid in stock to Frontier by 7% per year (compounded daily). Global Crossing 29. How will this combination affect Global Crossing's growth? Global Crossing believes that GSP has a projected growth rate that is higher than Global Crossing when combined with Frontier. GSP will essentially combine Global Crossing and Frontier's current network, data and wireless businesses -22- with the rapidly growing data and wireless businesses of U S WEST. 30. Global Crossing has evolved considerably since its IPO nine months ago; What are some of the important events which have impacted the company? By the end of the year 2000, Global Crossing will have invested approximately $4.5 billion in a state-of-the-art subsea and terrestrial network serving a very profitable sector of the telecom market. In addition to delivering strong financial results, including the recognition of more than $600 million of revenue since commencing commercial operations and a backlog of signed sales contracts in excess of $1 billion at the end of 1998, Global Crossing has achieved several value-enhancing milestones including (i) the development of Pan European Crossing, an $850 million terrestrial network connecting 24 cities in Europe to the Global Crossing network, (ii) the development of Global Access Limited, a terrestrial fiber network in Japan being developed jointly with Marubeni, (iii) the appointment of Robert Annunziata as CEO, (iv) the development of South American Crossing, a $1.1 billion subsea and terrestrial network connecting six South American countries to the Global Crossing network, (v) the announcement of AC-2, a $750 million 2.5 Terabit-per-second fiber optic cable to provide additional capacity in the transatlantic market where demand has dramatically exceeded market forecasts of only one year -23- ago, (vi) the announced acquisition of Frontier and (vii) the announced acquisition of Global Marine from Cable & Wireless plc. -24- Exhibit 1 Sequence of Events 1. Agreement to acquire Frontier Corporation by Global Crossing announced (March 17, 1999) 2. Merger of Global Crossing with U S WEST announced (May 17, 1999) 3. 39,295,305 Global Crossing shares acquired by U S WEST pursuant to tender offer (estimated late June, 1999) 4. Exchange ratio for Global Crossing/Frontier merger set based on the average volume-weighted averages of the trading prices of Global Crossing Common Stock for the 15 trading days selected randomly from the 30 consecutive trading days preceding the date at which closing conditions are satisfied (estimated Fall, 1999) 5. Receipt of Global Crossing/Frontier regulatory clearance. Global Crossing/Frontier merger closes; Global Crossing issues between approximately 201.5 million and 331.1 million shares to Frontier shareholders depending on the Global Crossing stock price during the pricing period (estimated Fall, 1999) 6. The exchange ratio in the Global Crossing / U S WEST merger will be fixed to ensure that U S WEST shareholders and Global Crossing shareholders (including the former Frontier shareholders) will each have approximately 50% ownership in the combined entity 7. Shareholder votes by Global Crossing and U S WEST shareholders (estimated mid-2000) 8. Approximately 60 days prior to closing of the Global Crossing / U S WEST merger, an appraisal process to determine the value of GSP relative to LSP will be commenced; the components of GSP and LSP are explained in the Investor Q&A (estimated mid-2000) 9. Approximately 30 days prior to closing of the Global Crossing / U S WEST merger, shareholders of Global Crossing and U S WEST will be mailed forms to elect how they would like to allocate the value of their holdings between GSP Stock and LSP Stock; proration adjustment if necessary (estimated mid-2000) 10. Receipt of Global Crossing/U S WEST regulatory clearance (estimated mid-2000) 11. Global Crossing/U S WEST merger closed (estimated mid-2000) __________________ Assumes, among other things, that the Global Crossing stock price remains within the Frontier collar for purposes of determining the Frontier exchange ratio and that all necessary regulatory approvals for the merger are obtained in a timely manner. -25- Exhibit 2 Fact Sheet - -- Exchange Ratio: -- 1.00 Election Right per Global Crossing share -- 1.21 Election Rights per U S WEST share (assuming the minimum number of Global Crossing shares are issued in the Frontier merger) -- Exchange ratio subject to adjustment for the number of shares of Global Crossing stock issued in the Frontier merger (see Exhibit 7) -- U S WEST shareholders to have approximately 50% ownership at closing - -- Implied Price to USW: -- Based on an Exchange Ratio of 1.21 and a $60.00 Global Crossing closing stock price on 5/13/99: $72.60 -- Plus: Indicated Special Dividends: $1.00 at closing plus $0.215/quarter -- Total: $73.60 plus $0.215/quarter - -- Management: -- Sol Trujillo and Bob Annunziata to be Co-CEOs - -- Board: -- Equal board representation (10 each) plus 2 newly appointed directors - -- Tracking Stock: -- Shareholders may elect to receive their consideration in GSP Stock, LSP Stock or a combination of both (see Exhibits 3-4) -- The tracking stock election is subject to pro ration (see Exhibits 5-6) - -- Interim U S WEST Dividend Policy: -- $0.215 per share special quarterly dividend and $0.75 per share total -26- quarterly dividend prior to closing ($3.00 annualized) -- $1.00 special per share dividend at closing to U S WEST shareholders -27- - -- Anticipated Closing: -- Mid 2000, subject to completion of regulatory review - -- Headquarters: -- New York, New York with significant operations in Denver, Rochester and Los Angeles - -- Anticipated Accounting: -- Purchase accounting with U S WEST as accounting acquiror - -- Tender offer: -- As a first step of combination, U S WEST to purchase 39,295,305 Global Crossing shares (approximately 9.5%) at $62.75 (approximately $2.5 billion) -- Intention to enter into commercial agreements to provide incremental revenue and profits prior to closing - -- Conditions to Closing of Merger: -- Closing of Global Crossing/Frontier merger -- U S WEST as accounting acquiror -- Regulatory and other customary conditions -28- Exhibit 3 Two Tracking Stocks Global Service Provider (GSP) Local Service Provider (LSP) GSP Stock LSP Stock - -- Global Crossing subsea and -- U S WEST local exchange terrestrial global fiber network - -- U S WEST !NTERPRISE data -- U S WEST in-region long activities distance and future inter-LATA long distance (after Section 271 approval) - -- Frontier U.S. Fiber -- U S WEST private lines network, Internet, data and long distance - -- Frontier CLEC operation -- Frontier local exchange and associated long distance - -- U S WEST wireless and -- U S WEST and Frontier Internet Yellow Pages directory publishing operations - -- U S WEST video services - -- Global Marine -29- Exhibit 4 Example Tracking Stock Mechanics Step 1: Appraisal - - The relative values of GSP and LSP are determined by appraisal in order to calculate the GSP to LSP Value Ratio. Step 2: Calculation of Shares per Election Right: - - Simple formulas determine the maximum number of shares of GSP or LSP that will be received per Election Right, subject to pro ration, by each U S WEST and Global Crossing shareholder. Example: GSP is determined to have value 25% greater than LSP resulting in a GSP to LSP Value Ratio of 1.25. GSP = 1+ GSP to LSP Value Ratio = 1 + 1.25 = 1.80 ------------------------- -------- GSP to LSP Value Ratio 1.25 LSP = 1+ GSP to LSP Value Ratio = 1 + 1.25 = 2.25 In this example, each Election Right may be exercised for either 1.80 GSP shares or 2.25 LSP shares. Step 3: Shareholder Elections - - Global Crossing and U S WEST shareholders elect the mix of GSP Stock and LSP Stock they wish to receive. Example: A U S WEST shareholder who owns 100 U S WEST shares elects to receive 50% of value in GSP Stock and 50% of value in LSP Stock. A U S WEST shareholder is assumed to receive 1.2114 Election Rights per U S WEST share. GSP Shares Elected = U S WEST x Exchange % GSP GSP Shares Ratio x Elected x Shares Per Election = 100.0 x 1.2114 x 50% x 1.80 = 109.0 (cash for fractional shares) -30- LSP Shares Elected = U S WEST x Exchange % LSP LSP Shares Ratio x Elected x Shares Per Election = 100.0 x 1.2114 x 50% x 2.25 = 136.3 (cash for fractional shares) -31- Exhibit 5 Example Tracking Stock Mechanics - LSP Oversubscription Case LSP shares are assumed to be oversubscribed by 20% GSP to LSP Value Ratio is assumed to be 1.25 If LSP shares are oversubscribed, the following steps will occur: Step 1: GSP Elections Granted - - In this example, each shareholder who elects GSP shares will receive the GSP shares he or she elects. Example: The U S WEST shareholder's 50% GSP election is granted: 109.0 (cash for fractional shares) GSP shares Step 2: LSP Elections Pro Rated - - In this example, pro ration results in LSP shares elected being only partially granted Example: The U S WEST shareholder's 50% LSP election is pro rated LSP Shares Received = LSP Shares Elected x Aggregate LSP Shares -------------------- Aggregate LSP Share Elections = 136.3 x 100% (cash for fractional ---- shares) 120% = 113.6 (cash for fractional shares) Step 3: Additional GSP Shares Allocated - - Pro ration results in additional GSP shares being allocated to shareholders who elected LSP shares. Because the value per share of LSP and GSP is not equal in this example, the following formula is designed to calculate the equivalent number of GSP shares required to compensate a shareholder for the pro ration. In this example, the U S WEST shareholder receives additional GSP shares in lieu of some of the oversubscribed LSP shares. -32- Additional GSP Shares Received = Shares of LSP Elected - Shares of LSP Received GSP to LSP Value Ratio = 136.3 - 113.6 ------------- 1.25 = 18.2 (cash for fractional shares) -33- Exhibit 6 Example Tracking Stock Mechanics - GSP Oversubscription Case GSP shares are assumed to be oversubscribed by 10% GSP to LSP Value Ratio is assumed to be 1.25 If GSP shares are oversubscribed, the following steps will occur: Step 1: LSP Elections Granted - - In this example, each shareholder who elects LSP shares will receive the LSP shares he or she elects. Example: The U S WEST shareholder's 50% LSP Election is granted: 136.3 (cash for fractional shares) LSP shares Step 2: GSP Elections Pro Rated - - In this example, pro ration results in GSP shares elected being only partially granted. Example: The U S WEST shareholder's 50% GSP election is pro rated GSP Shares Received = GSP Shares Aggregate GSP Shares Elected x -------------------- Aggregate GSP Share Elections = 109.0 x 100% ---- 110% = 99.1 Step 3: Additional LSP Shares Allocated - - Pro ration results in additional LSP shares being allocated to shareholders who elected GSP shares. Because the value per shares of LSP and GSP is not equal in this example, the following formula is designed to calculate the equivalent number of LSP shares required to compensate a shareholder for the pro ration. In this example, the U S WEST shareholder receives additional LSP shares in lieu of some of the oversubscribed GSP shares. Additional LSP Shares GSP to LSP Value Ratio x (Shares of GSP Elected - Received = Shares of GSP Received) = 1.25 x (109.0-99.1) = 12.4 -34- Exhibit 7 Illustrative Exchange Ratio Sensitivity to Frontier/Global Crossing Collar (Dollars and Shares in Millions, Except per Share Data) Global Crossing/Frontier Exchange Ratio At Bottom At Top of Collar of Collar 1.8229x 1.1095x Global Crossing Share Price $34.56 $56.78 Estimated Frontier Diluted Shares at closing 181.6 181.6 of Frontier merger (a) Global Crossing Pre-Frontier Diluted Shares 457.8 457.8 Estimated Global Crossing Shares Issued for 331.1 201.5 Frontier (a) Global Crossing Post-Frontier Diluted Shares 788.9 659.4 Global Crossing Shares Purchased by U S WEST (39.3) (39.3) in Tender Estimated Global Crossing Post-Tender-Shares 749.7 620.1 U S WEST Diluted Shares 511.9 511.9 Implied Global Crossing/U S WEST Exchange 1.4646x 1.2114x Ratio Implied Per Share Value to U S WEST $50.62 $68.79 Number of Election Rights per U S WEST share 1.4646 1.2114 Number of Election Rights per Global 1.0000 1.0000 Crossing share -35- (a) The actual number of Global Crossing shares issued in connection with the Frontier merger will also depend on the actual number of Frontier shares outstanding at the time of the closing of the Frontier merger. -36- U S WEST Safe Harbor Statement: This document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For these statements, we claim the safe harbor for "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors that could cause actual results to differ from expectations include: (i) greater than anticipated competition from new entrants into the local exchange, intraLATA toll, wireless, data and directories markets, causing loss of customers and increased price competition; (ii) changes in demand for U S WEST's products and services, including optional custom calling features; (iii) higher than anticipated employee levels, capital expenditures and operating expenses (such as costs associated with interconnection and year 2000 remediation); (iv) the loss of significant customers; (v) pending and future state and federal regulatory changes affecting the telecommunications industry, including changes that could have an impact on the competitive environment in the local exchange market; (vi) a change in economic conditions in the various markets served by U S WEST's operations; (vii) higher than anticipated start-up costs associated with new business opportunities; (viii) delays in U S WEST's ability to begin offering interLATA long-distance services; (ix) consumer acceptance of broadband services, including telephony, data and wireless services; and (x) delays in the development of anticipated technologies, or the failure of such technologies to perform according to expectations. These cautionary statements by U S WEST should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by U S WEST. U S WEST cannot always predict or determine after the fact what factors would cause actual results to differ materially from those indicated by the forward-looking statements or other statements. In addition, readers are urged to consider statements that include the terms "believes", "belief", "expects", "plans", "objectives", "ancitipates", "intends", "targets", or the like to be uncertain and forward-looking. All cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. U S WEST does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. -37- -----END PRIVACY-ENHANCED MESSAGE-----