Verizon Threatens to Abandon MCI Buyout

AP ^ | 4/5/05 | Bruce Meyerson

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Verizon is threatening to abandon its $7.5 billion buyout deal for MCI Inc. rather than pay more should the long-distance telephone company declare a rival $8.9 billion offer from Qwest as superior.

Verizon's announcement came one day before a deadline set by Qwest Communications International Inc. for MCI to accept or reject its bid.

In a statement Monday, Verizon Communications Inc. said, "If the MCI board, capitulating to Qwest's artificial deadline, declares this bid to be `superior,' it would seem to us that the decision-making process is being driven by the interests of short-term investors rather than the company's long-term strength and viability."

"Should this occur, we would no longer be interested in participating in such a process," the statement warned.

MCI declined comment on the latest tactical move in the two-month bidding war. It also wouldn't say whether it planned any response before Qwest's deadline.

The Verizon deal values MCI at $23.10 per share, to be paid in stock and cash. That's an increase from $20.75 under the agreement the two companies reached in mid-February.

Qwest's offer is worth $27.50 in cash and stock, nearly 20 percent more than the latest Verizon deal.

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Qwest-MCI is far better for competition and the economy than Verizon-MCI. Both long-term (more than five years) and short-term (immediate stock value) interests of MCI stockholders are served by the higher bid from Qwest. The MCI board should do the right thing and accept the Qwest bid.

[Pylot]

I have to agree that the Qwest/MCI venture would be a much better fit for both companies. I am rooting for Qwest!

[TomasUSMC]

CANUHEARME NOW?

[Steven W.]

you've got to be kidding! Quest is making a desperation move here and is trying to save themselves with this pitch!

[Steven W.]

how are long term shareholder interests (of MCI shareholders) served? Obviously Quest is helped as otherwise still mere bankruptcy material while Verizon has been pumping the past few years' profits into their balance sheet, reducing billions in debt and recently increasing their dividend.

[Eric in the Ozarks]

The question needs to be asked: Does Quest have the $ billions ?

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how are long term shareholder interests (of MCI shareholders) served?

Preservation of competition for enterprise markets will inspire innovation and that leaves plenty of room for growth with Qwest-MCI. Verizon-MCI eliminates competition and further stagnation in the industry will result. Five years out, a tired old behemoth isn't going to be a "growth holding".

[Solar Wind]

"Preservation of competition for enterprise markets will inspire innovation and that leaves plenty of room for growth with Qwest-MCI."

Agreed. Though I am no fan of Quest and they have made plenty of mistakes over the years I am hoping that their proposal is accepted by MCI. I beleive that it is true that this is a life and death bidding war for Qwest. Verizon will survive without MCI. I am not sure that Qwest will prosper or even survive in the long run with an MCI/Verizon merger.

A Qwest/MCI merger will increase competition and force more innovation in an industry that has to be seriously prodded to innovate. A Verizon/MCI merger would consolidate too much in too few carriers and encourage market stagnation. There is too much market consolidation going on in telecom as it is.

Mr Sol

[PAR35]

Both long-term (more than five years) and short-term (immediate stock value) interests of MCI stockholders are served by the higher bid from Qwest.

Short term more money is better. It is an open question what Quest will be worth 5 years after the purchase. If I was Verizon, I'd let Quest make the purchase, hope they choke on it, and then try to grab all of Quest at a lower overall cost in a couple of years. Long term you are probably going to be down to two major players nationwide. SBC and Quest.