Qwest Communications International is ending its relationship with Sprint Nextel and has struck a new deal to resell wireless service through Verizon Wireless.
The company said Monday that it plans to resell wireless service from Verizon Wireless starting this summer. The companies have signed a five-year contract. Financial terms of the deal weren't disclosed.
Qwest has been reselling Sprint's wireless service since 2004 under its own brand. A spokesman for the phone company said it will continue to service customers on the Sprint network until its contract expires with Sprint in February 2009. Current customers will be given the option to move over to Verizon's service. Subscribers will also likely be given free replacement phones if they choose to keep their service and switch to Verizon.
Under the terms of the new deal, Qwest will not market the new Verizon offering under its own brand, but it will sell the service as part of a packaged bundle with customers still getting a single bill for all their Qwest services.
Qwest's CEO said earlier this year that the company was looking at other partners in wireless. There had been speculation at the time that Verizon Wireless would be the new partner.
The news surely comes as a blow to Sprint Nextel, which has been losing customers the past several quarters. Qwest has about 824,000 wireless subscribers that use Sprint's network. Sprint ended 2007 with about 53.8 million subscribers in total.
The sagging phone business has caused Qwest Communications International to offer hundreds of employees a voluntary buyout as the company continues to tighten its belt.
On Tuesday, Qwest, the third-largest phone company in the U.S., said that it would cut "less than 2 percent" of its 36,843 workforce through a voluntary program. The cuts are targeted at roughly 700 technicians and other Qwest employees who work for the company's traditional landline business, according to the Associated Press.
The cuts come as Qwest and other local phone companies are seeing thousands of customers abandon their old landlines for alternatives, like cell phones and voice over IP services from their cable operators.
Qwest provides local phone service in 14 states, mostly out West. The company has about 12.78 million landlines, a number that dropped 7.3 percent last year from the total in 2006, the AP reported.
The phone company negotiated the buyouts, which are expected to be completed by the end of the month, with the Communication Workers of America union. Qwest had been reducing its workforce through natural attrition, but the voluntary program was put into place to give some employees the option to retire early, which will speed up some departures.
Qwest hasn't said how much the job cuts will cost or how much they will save the company down the road.
Qwest Communications' former Chief Executive Joseph Nacchio, who was sentenced last summer to six years in prison for insider trading, is getting a new trial.
On Monday, the U.S. 10th Circuit Court of Appeals overturned the 19 guilty verdicts and ordered a new trial for Nacchio stating that the trial judge had improperly limited testimony from an expert witness and excluded classified evidence, which could have been used in Nacchio's defense.
Nacchio, who served as the phone company's CEO from 1997 until 2002, was convicted in April last year on 19 of 42 counts of insider trading. Prosecutors said that Nacchio had profited from selling $101 million worth of Qwest shares after company insiders had told him the company could not meet financial targets. In July, he was sentenced to six years in federal prison. He was fined $19 million and ordered to forfeit $52 million.
The government has argued that Nacchio knew Qwest was in financial trouble, while presenting a much rosier scenario to shareholders and analysts before he sold his own shares in the company.
Nacchio appealed his conviction in October. And his lawyers argued that what he knew about the company's finances when he sold his stock wasn't "material" information that required disclosure to investors. According to one of Nacchio's lawyers, the judge limited the testimony of an expert witness and also rejected classified evidence that was important in Nacchio's defense.
Nacchio's lawyer argued that he was upbeat about the company's prospects during this period because he knew of impending lucrative, secret contracts with the government. The judge in the trial barred some parts of the classified defense, and the issue was barely discussed in the trial.
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