Us West To Divide Stock
U S West Inc. plans to divide its stock into two classes, hoping flexibility for investors results in a higher value for the company.
If approved by shareholders, U S West would be the first big local phone carrier to follow General Motors, USX and others in the creation of so-called “targeted stocks” in which investors can bet money on just a part of its business.
One class of U S West stock will reflect its core local phone business and the other its growing wireless, multimedia and international operations, executives said Monday.
Analysts generally praised the idea and said other regional Bell carriers may do the same thing as deregulation nears and competition grows. U S West’s stock was up 62 cents at $42.50 on the New York Stock Exchange in afternoon trading.
“All of the telephone companies will watch carefully the way the market reacts to U S West’s plan,” said Blake Bath, analyst at Sanford C. Bernstein & Co. in New York. “However, the decision to pursue this kind of strategy will depend on the amount of non-traditional assets that a company has.”
U S West, based in suburban Denver, has been one of the most aggressive Baby Bell companies in developing cable TV, wireless data and other businesses that take advantage of digital technology for communication.
It invested $2.5 billion in the Time Warner Inc.’s cable operations in 1993 and is setting up an interactive TV business in Omaha, Neb. In the United Kingdom, U S West has joined with Tele-Communications Inc. to run a phone and cable service.
Those operations, along with its cellular division, will become the U S MediaVision Group. Its main telephone business, which covers 14 Western states from Minnesota to Arizona, will have stock designated as U S West Communications Group.
General Motors allows investors to buy targeted stock in its Electronic Data Systems and Hughes Electronics subsidiaries. USX has targeted stock for U.S. Steel and Marathon Group.
TCI last fall announced plans to have four classes of stock tied to different aspects of its business.
“In our case, our businesses have a common base in telecommunications but the investment characteristics are markedly different,” chief executive officer Richard McCormick said at a news conference.
The Communications Group will continue to pay the company’s dividend, which is currently $2.14 per year, and is likely to be most attractive to people looking for consistent income from a stock, a traditional reason for investing in phone and other utilities.
The MediaVision Group is more likely to attract growth-oriented investors. Its cash flow is improving at a rate of 20 percent annually, McCormick said, adding, “We think that particular growth is hidden within the total U S West.”
Under the proposal, each shareholder would receive the same number of shares in both entities that they now hold in U S West as a whole. For example, a shareholder who owns 10 shares of U S West stock would receive 10 shares each in the MediaVision Group and the Communications Group.