The U.S. Attorney's office did not disclose the subject matter of the investigation, it said.

Denver, Colorado-based Qwest said it plans to fully cooperate.

Following the news, Qwest's shares fell 93 cents or 35.6 percent to $1.67 on the New York Stock Exchange.

The company's announcement comes on the heels of a report by the Wall Street Journal last Friday that the U.S. Department of Justice had launched a criminal investigation into Qwest, citing people with knowledge of the situation.

Qwest, the No. 4 U.S. local telephone company, has been under pressure for months as it struggles to cope with a cash crunch under a debt pile of some $26 billion. Credit rating agencies have slashed the company's debt to "junk" status, and the U.S. Securities and Exchange Commission is probing its accounting practices.

Qwest asked employees late last month to take unpaid leave in a move to cut costs. In mid-June, the company ousted Chairman and Chief Executive Joseph Nacchio, seeking to soothe investors and buoy its mauled stock price.

Qwest's disclosure marks the latest announcement from a U.S. company that has come under government scrutiny. Others include WorldCom Group (WCOME) (MCITE) , Enron Corp. (ENRNQ) , Global Crossing Ltd. (GBLXQ) and Kmart Corp. (KM