KPNQwest To Acquire Global TeleSystems, Inc. Assets, Customers In Expansion To Be Top European Provider of Data, Internet Services

DENVER, October 18, 2001--Qwest Communications International Inc. (NYSE:Q), the broadband communications company, today announced an agreement with Koninklijke KPN N.V., the Dutch telecommunications company, for Qwest to purchase from KPN approximately 14 million shares of KPNQwest N.V. for $4.58 per share and Anschutz Company, Qwest?s principal shareowner, to purchase an additional six million KPNQwest shares at the same price.

Separately, KPNQwest announced plans for a major European expansion with the acquisition of Global TeleSystems, Inc.?s (GTS) Ebone and Central Europe businesses for approximately $580 million (645 million euro), including the assumption of debt. At the completion of the acquisition, KPNQwest will have a $450 million (500 million euro) credit facility to fully fund the combined company until it becomes free cash flow positive in the fourth quarter of 2003.

?Owning a larger stake in KPNQwest is a well-timed strategic opportunity as KPNQwest significantly expands its pan-European leadership position; fully funds its business plan after a major acquisition, and accelerates free cash flow,? said Qwest Chairman and CEO Joseph P. Nacchio, who also serves as chairman of the KPNQwest board.

?The changes in the governance of KPNQwest eliminate a complicated structure that was useful when we set up the joint venture in late 1998,? Nacchio added. ?We expect the new structure will free KPNQwest to respond faster to changing market conditions and accelerate its growth.?

Qwest Purchase of KPN Shares

After Qwest purchases the KPN shares, the KPNQwest supervisory board will consist of six members. Qwest will nominate three directors, KPN will nominate one director and two directors will be independent of both Qwest and KPN. Qwest will retain its special rights to approve certain strategic decisions of KPNQwest.

KPN?s equivalent special approval rights will be eliminated, but KPN will retain certain minority shareholder protection rights. The obligations of Qwest and KPN to not compete with KPNQwest in Europe will be terminated. However, if KPN engages in certain competitive activities, KPN?s minority shareholder protection rights will be eliminated, and KPN?s nominee on the KPNQwest supervisory board must be replaced by someone who is not affiliated with KPN.

There are currently approximately 451 million shares of KPNQwest outstanding. As part of the purchase, the voting power of each Class A and B share will be reduced from 10 votes per share to one vote per share, which is the same as the voting power of each Class C share. After the purchase, Qwest will hold 214 million Class B shares, or about 47.5% of the voting power, and KPN will hold 180 million Class A shares, or about 40% of the voting power.

Current restrictions on Qwest?s sale of its KPNQwest shares will be eliminated, except that Qwest will grant to KPN certain ?tag-along? rights if Qwest were to sell any shares. Current restrictions on KPN?s sale of KPNQwest shares will be modified to permit KPN to sell these shares in underwritten public offerings, in private transactions to institutional purchasers who agree to be subject to the sale restrictions or, beginning in 2003, in market transactions, subject to significant volume limitations. The buyer will receive publicly-held Class C shares. The ?buy-sell? arrangements in the joint venture agreement among the parties will also be eliminated.

Neither Qwest nor KPN will have any obligation to make capital contributions to KPNQwest. Qwest will continue to account for its proportionate share of KPNQwest?s profit or loss under the equity method of accounting.

As part of the share purchase transaction, KPN will grant to Qwest an option to purchase some or all of KPN?s shares in KPNQwest in March 2002. Qwest is under no obligation to exercise the option, which is assignable to third parties. Until the option expires, any permitted sale of shares by KPN will be subject to a right of first refusal by Qwest.

Qwest expects to close the purchase of KPN shares before December 31, 2001. The share purchase is subject to several conditions, including the execution of definitive transaction documents, consents of workers? councils of KPN and KPNQwest, antitrust approval in the United States and Europe, and approval by KPNQwest shareholders of certain amendments to the KPNQwest articles of association.

KPNQwest Acquisition of GTS

KPNQwest will acquire the GTS businesses in a pre-packaged bankruptcy proceeding for approximately $580 million (645 million euro) (net of cash). KPNQwest will issue approximately $190 million (210 million euro) in 10-year convertible notes to GTS bondholders in exchange for GTS bonds and convertible securities of $l.7 billion (1.9 billion euro face value). In addition, KPNQwest will assume the GTS credit facility, which at the time of closing is estimated to be approximately $190 million (210 million euro), and GTS capital leases of approximately $225 million (250 million euro.) GTS is expected to have approximately $22 million (25 million euro) in cash at closing. KPNQwest and a newly formed bank syndicate, including the GTS credit facility banks, have agreed to increase the facility to $450 million (500 million euro.)

The GTS acquisition will contribute significantly to KPNQwest?s revenue and earnings before interest, taxes, depreciation and amortization (EBITDA). After the acquisition, KPNQwest expects pro forma revenues of $1.2 - 1.25 billion (1.3 ?1.4 billion euro) in 2002, pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) of $155 ? 180 million (175-200 million euro) in 2002. With the increased EBITDA and credit facility, KPNQwest expects that it is fully funded through the time it becomes free cash flow positive in the fourth quarter of 2003. Synergies from the combined company are expected to be $540 million (600 million euro) over four years.

The expanded KPNQwest will be Europe?s top provider of data and Internet services with a 60-city, 15,600-mile fiber optic network connected to Qwest?s global network. The GTS acquisition will extend the KPNQwest fiber optic network deeper into the United Kingdom plus key areas of Eastern Europe, Spain, Italy, and Ireland with 14 metro fiber networks and 10 additional cities connected by fiber.

The GTS acquisition will add to KPNQwest nearly 48,000 European accounts with recurring revenue. In addition, the number of Web hosting centers would more than double to 30. KPNQwest already has contracts with leading global companies and European businesses including Dell Computer Corporation, Cap Gemini Ernst & Young and Nokia Corporation.

KPNQwest expects to close the acquisition of the GTS business about March 2002. The acquisition is subject to several conditions, including consents of workers? councils of KPNQwest and GTS, antitrust approval in Europe, bankruptcy court approval, and KPNQwest shareholder approval. No additional corporate approvals by KPNQwest or GTS are required to complete the acquisition transaction.

About Qwest

Qwest Communications International Inc. (NYSE: Q) is a leader in reliable, scalable and secure broadband data, voice and image communications for businesses and consumers. The Qwest Macro Capacity® Fiber Network, designed with the newest optical networking equipment for speed and efficiency, spans more than 113,000 miles globally. For more information, please visit the Qwest Web site at

This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by Qwest with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in quarterly results, volatility of Qwest?s stock price, intense competition in the communications services market, changes in demand for Qwest?s products and services, dependence on new product development and acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels, higher than anticipated employee levels, capital expenditures and operating expenses, rapid and significant changes in technology and markets, adverse changes in the regulatory or legislative environment affecting Qwest?s business, delays in Qwest?s ability to provide interLATA services within its 14-state local service territory, adverse conditions in the economy nationally and within its territory, failure to maintain rights of way, and failure to achieve the projected synergies and financial results expected to result from the acquisition of U S WEST timely or at all and difficulties in combining the operations of Qwest and U S WEST. This release may include analysts? estimates and other information prepared by third parties for which Qwest assumes no responsibility. Qwest undertakes no obligation to review or confirm analysts? expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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