RealTime IT News

Analysts Skeptical of Qwest Claim

UPDATED: Qwest CEO Richard Notebaert yesterday laid out reasons why MCI should accept his company's takeover offer over Verizon's bid.

Besides a dollars-and-cents argument, Notebaert contended that a merger with Qwest would clear the regulatory process in less time than a Verizon-MCI combination.

"Qwest's proposal is superior to the Verizon proposal because our regulatory approval process is likely to be completed at least six months more quickly," Notebaert said in a letter to MCI Chairman Nicholas Katzenbach.

Richard Notebaert
Richard Notebaert
Source: Qwest

Notebaert did not present a rationale for the claim and a spokesman for the Denver Baby Bell was not immediately available. "After an exhaustive review of the alternatives on the table, we're very confident that our board made the right decision for our shareholders, customers and employees," MCI spokesman Peter Lucht said.

Some telecom industry-watchers don't agree with Qwest's timetable, citing complexities of the proposed deals and the unpredictability of the regulatory approval process.

It's not unusual for mega-mergers to take more than a year to wend their way through the Federal Communication Commission (FCC), Department of Justice (DoJ) and state utilities reviews.

"We are skeptical of Qwest's arguments that it could be expected to usher a proposed merger with MCI through the government review process six months quicker than Verizon could," Legg Mason analysts said in a research note this morning. "Predicting the timing of such reviews is even more difficult than predicting the outcomes."

The analysts said Qwest has some timing arguments in its favor, but a number of factors are the same. Both would involve competitive issues and take place at a time of multiple deals in the industry, as the FCC leadership and staff is changing. What's more, objections from consumer groups or competitors could drag out the process.

"The most likely outcome is that both deals would travel a complicated, but similarly long, path to approval, with conditions," Legg Mason said.

In other regulatory news, The Financial Times reported today that SBC will file regulatory documents next week in support of its $16 billion purchase of AT&T .

Some of the regional carrier's arguments, the paper said, are the uncertainty of the AT&T future if the merger fails and the ability of SBC to bring advances from AT&T's research and development lab to consumers.

Jim Wagner contributed to this report.