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Qwest Communications International Inc. began talks Wednesday on a new contract for nearly 25,000 employees, a key challenge as the struggling company plots a strategy to compete with cell phones, the cable TV industry and big new rivals being created by mergers. The workers say they will seek an increase in base pay — their first in nearly five years — and the preservation of health-care benefits. A Qwest spokesman declined to discuss what the telephone company will seek in renegotiating the two-year pact that expires at midnight Aug. 13. LeRoy Christensen of the Communications Workers of America, one of two unions involved, expects the talks to be difficult. “When you negotiate with any company that’s not doing so good economically, you have to recognize that,” he said. In 2003, Qwest workers approved a contract with two bonuses instead of a salary hike, in part because of the company’s many problems. These included a suffocating debt load of $20 billion, stagnant revenues, and government probes into Qwest’s accounting. Today, Qwest still has long-term debts of $17 billion. The talks come less than two months after Qwest withdrew from a heated bidding war with Verizon Communications Inc. to acquire MCI Inc. Qwest had hoped to clean up its shaky balance sheet with the addition of MCI’s valuable assets and relatively small debt load. But MCI’s board of directors rebuffed Qwest four times, opting for lower-priced bids from Verizon, whom they viewed as a less risky partner. In losing, Qwest also failed to prevent the creation of a new giant rival in Verizon-MCI or add more heft to contend with the planned merger of AT&T Corp. into SBC Communications. As a result, Qwest has said it is looking for other acquisitions or partnerships. The threat posed by those mergers may loom large over Qwest’s talks with the CWA’s District 7, representing about 24,300 workers, and the International Brotherhood of Electrical Workers, representing about 350 employees in Montana. Overall, Qwest has about 40,000 employees. In addition to wages and benefits, the six-member union bargaining team plans to discuss outsourcing and worker productivity issues, Christensen said. “There are concerns particularly around productivity,” he said. “The company has been trying to increase productivity, get more work in the same amount of time.” Jeff Miller of CWA’s national office expects benefits to be a key issue since businesses across the country are seeking ways to control rising health-care costs. Analyst Donna Jaegers, who tracks Qwest for Denver-based Janco Partners, does not expect a strike. She said Qwest needs to retain the support of its work force because of the competitiveness of the industry. “I think you’ll get a lot of rhetoric beforehand but at the end of the day they’ll work together,” she said. “The union understands Qwest’s situation.” Company spokesman Steve Hammack declined comment other than to say, “We have a strong and positive working relationship with our unions.” Qwest became a major industry player by acquiring former Baby Bell US West Inc. in 1999, a $38 billion merger that brought its total market value to about $85 billion. With the collapse of the technology bubble, Qwest’s market capitalization has dwindled to less than $7 billion. The Securities and Exchange Commission began investigating Qwest two years after the merger, alleging the company inflated revenue through fraudulent transactions. Qwest eventually restated financial results for 2001 and 2002 to lower its reported revenue by about $2.5 billion, and agreed to pay $250 million to settle the allegations without admitting wrongdoing. SEC suits are still pending against several former executives. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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