IT'S CLEAR AS A BELL THAT QWEST'S STAND-ALONE DAYS ARE NUMBERED.(Business)(Column)

Byline: Rob Reuteman, Rocky Mountain News

Ever since Sept. 10, when word leaked that Qwest's settlement with the Securities and Exchange Commission was imminent, the rumor mill has been cranking out grist like Purina:

* Dick Notebaert is buying a house in San Antonio, where he will head up SBC, which is buying Qwest.

* A former telco exec told me a couple of weeks ago that he'd heard there was a "handshake" on a deal for SBC to buy Qwest.

* Qwest is going to sell off Arizona and New Mexico to SBC, and the rest to Sprint.

* A former Qwest exec told me recently that the wives of Qwest execs brought in by Notebaert typically begin cocktail chatter with the phrase, "Once we're done here . . ."

* On Oct. 1, The Denver Post ran a story in its business section speculating that a merger announcement could be made that day, citing increased "buzz" on Internet message boards.

In answer to all the above, I'd say two things: Qwest's future is not as a stand-alone company. A sale will take two or three years.

The SEC settlement announced Thursday is a hugely important step forward. It removes some uncertainty, and the markets love certainty. It will be costly, and I'm not just talking about the $250 million fine. The damning language about Qwest's fraudulent behavior gives great impetus to class-action lawsuits, the cost of which easily will exceed the fine. As local telecom consultant Tom Friedberg told me Thursday, "Every class-action trial lawyer who doesn't have a good Vioxx case will be taking a crack at Qwest."

But there will be a day when it's curtain time for these costly sideshows, and that's when Qwest will be sold. The irrefutable bottom line is that the numbers don't work anymore. Qwest's 14-state service area comprises 40 percent of the nation's land mass and only 14 percent of its population. In the past five to six years, the successful telecommunications companies, from phone to cable, have been pouring billions into system upgrades that offer customers a broad suite of services. One monthly bill will buy phone, Internet and television. This model works when companies have the customer population density to pay for costly capital improvements. Qwest simply doesn't. Not enough people live out here, and in the stampede toward bundled services, Qwest is being left behind.

"The die was cast when they failed to grasp that wireless was going to be the way of the world," Friedberg said. "For the foreseeable future, Dick Notebaert will preside over the slow erosion of a circuit-switch monopoly that failed to grasp wireless."

I have a friend with a Qwest cell phone. She went to New Orleans this year and was shocked to find that it didn't work there. She went to Key West, Fla., a month later. Didn't work there. That's not good enough anymore. Qwest now resells Sprint wireless, DirecTV and some other services, but let's face it, resellers are everywhere.

"Without wireless, this company has no business being independent," Friedberg said. "But no one is going to want to buy the equity of a company with unassessable liabilities. Any sale will have to be done very deftly and adroitly, probably on a tax-shelter basis.

"We're all saddened in Denver because of it, but this is the end of the beginning of the end for Qwest."