Ambitious Bermuda-based telecommunications newcomer Global Crossing Ltd. is to merge with a massive US local phone company in a $37 billion deal announced yesterday.

The merger with Denver-based US West Inc. will create a New York-headquartered powerhouse Internet and telephone service provider called Global Crossing Inc.

with a market capitalisation of $75 billion.

But local Global Crossing executives said it was likely a presence of the company would remain in Bermuda -- despite the new entity incorporating in Delaware once the merger closes mid-2000 after the normal regulatory process.

Neither the local office or its California big-brother could confirm yesterday what, if any, operations would continue on the Island.

CEOs of both companies praised the "extra global reach and local capabilities'' the merger would give them to compete in the $1 trillion global telecommunications market and reach their aggressive growth targets.

And analysts widely praised the deal as making good sense for shareholders in the long-term, although they admitted there could be regulatory snarls to overcome first.

Shares in both companies faltered in the hours after the official announcement of the planned merger, despite industry rumours of the deal which surfaced last Friday and prompted both shares to creep up in value. US West -- created under the breakup of AT&T in 1984 -- brings millions of local phone and high-speed Internet customers in 14 western and midwestern states and a wireless phone service to the deal.

It brought in $12.4 billion in revenue last year.

In comparison Global Crossing offers local and long-distance phone service and has a rapidly expanding vast undersea fibre optic cable network.

It had revenue of only $424 million in 1998 and this year embarked on an expensive buying spree.

Just last month Global Crossing agreed to pay $725 million in cash for the undersea cable operations of the British telecommunications company Cable & Wireless.

In March the company signed a contract to buy New York-based phone company Frontier Corp. for $11 billion in stock.

Global Crossing's planned purchase of Frontier Corp. has been written into the deal and is expected to bring the giant new company's annual revenues to $19 billion.

In 1998 the three companies had combined sales in excess of $15 billion and almost 70,000 employees -- only 250 of which are at Global Crossing.

Companies in $37 billion merger Together they will have more than 115,000 combined route miles, more than 2.8 million fibre miles and a network linking 19 countries and 185 cities.

The new company would have local, national US and global phone assets and its adjusted earnings before interest, taxes, depreciation and amortisation are expected to approach $8 billion.

A key feature of the proposed combined company is its two separately traded stocks to give investors the choice of high-growth and income-oriented investment options.

One will reflect the high-growth long distance telephone, data and Internet businesses and fibre optic networks, while the other tracks traditional local phone operations and the printed phone directories businesses.

US West president and CEO Solomon Trujillo and Global Crossing CEO Robert Annunziata -- who will co-chair and co-CEO the new company together -- said there was an $850 million break-up fee.

If the local phone operator backs down from the deal it will have to pay Global Crossing $600 million in cash and buy $250 million in services from the telecommunications start-up.

And Global Crossing would have to pay $600 million if it pulled out.

Mr. Annunziata said competition in the telecommunications industry was spreading around the world.

"Today we are joining forces with a former regional Bell operating company that knows how to compete and offers customers a compelling array of integrated voice and data services.'' Mr. Trujillo said the deal brought together two "leading-edge companies to create a faster, more entrepreneurial global competitor with unique products and solutions for both residential and commercial customers. We are confident we can address any regulatory issues and gain approval for the merger on a timely basis. In addition to global scope and scale this merger is also about innovation, speed-to-market and superior customer service.'' The new company will be half owned by US West shareholders and half by Global Crossing/Frontier shareholders.

Under the fine print of the deal it was revealed each US West share will be exchanged for about 1.2 shares of one of the new two-category Global Crossing stock while each old Global Crossing share will be swapped for the new stock.

And US West will make a cash tender offer for around 39 million Global Crossing shares at a price of $62.75 per share.

This tender offer will start within five business days and is expected to be complete next month.

Shares of Global Crossing fell $1.125 to $60.25 on the Nasdaq. Shares of US West fell $4.06, or more than six percent, to $58.19 in heavy trading on the New York Stock Exchange as some investors were disappointed that US West did not get more than a 20 percent premium over its stock price, analysts said.

"There may be some disappointment there wasn't a bigger premium (for US West shareholders). But the deal is an attractive one for US West holders in the long run,'' said Scott Wright, a telecommunications analyst with Fahnestock & Co. Inc.

"The question is do you want to be the 100 percent owner of US West or a 50 percent owner of a truly global carrier? This is a tremendous opportunity over the long-term,'' Wright said.

Let's make a deal: Solomon Trujillo (left), chairman and chief executive of US West, and Robert Annunziata, CEO of Global Crossing Ltd., pose for a photograph prior to announcing the merger of the two companies in New York yesterday.