RealTime IT News

Qwest Blasts MCI Over Disconnected Talks

Qwest CEO Richard Notebaert is seething because acquisition talks with MCI have "gone dark."

It's the latest in an increasingly acrimonious fight between Qwest and Verizon for the Ashburn, Va., long-distance and network services provider.

In a letter to MCI directors, Notebaert said "there is no legally valid excuse not to continue the exchange of information." He urged MCI to "engage in negotiations to finalize the proposed merger agreement we provided to your advisors on March 16."

MCI said it will respond to Qwest's sweetened $8.45 billion offer by March 28; however Qwest expected talks to continue until that deadline.

Qwest still has questions about tax issues that could be easily answered if the parties resumed talks, Notebaert said. The Denver telecom also wants to talk with Richard Breeden, who was tapped to put MCI back on ethical footing after its historic accounting scandal about internal controls.

But Notebaert saved his harshest criticism for rival bidder Verizon, which still appears to be MCI's preferred merger partner despite a lower offer of $6.7 billion.

Verizon "continues in its shrill attempt to change the focus away from delivering maximum value to MCI shareholders, but ignores the one overriding issue: Qwest's offer is over 25 percent higher than Verizon's offer," Notebaert said in his letter.

For its part, Verizon sent its own letter yesterday to MCI laying out reasons "why the Qwest offer is not what it purports to be," Peter Thonis, a Verizon spokesman, said.

"While we certainly sympathize with Qwest management's plight and understand their desperation given Qwest's circumstances, we nevertheless feel compelled to again express our view that its proposal is profoundly flawed and its claims unsupportable," Verizon said in its letter.

Qwest's figures about synergies of a combined Qwest-MCI are overstated, Verizon contends. It also takes issue with Qwest's statement that a Qwest-MCI merger could win regulatory approval sooner than Verizon-MCI.

Qwest and Verizon covet MCI because of its large IP data-service deals with government agencies and corporations. Aand with the pending merger of SBC and AT&T , they don't want to be left behind in the wave of industry consolidation.

The Baby Bells see those long-term, high-margin contracts as crucial to their future prosperity, as cable operators, VoIP upstarts and wireless carriers try to hone in on their traditional businesses.

Qwest's aggressiveness is likely a result of concern over being marginalized. The company has 15.5 million access lines, 1 million DSL lines and 4.6 million long-distance customers, mostly in the Midwest and Western United States.

In a recent research note, Bryan Van Dussen, an analyst with Yankee Group, said Qwest has limited options to grow by acquisition if it can't sway MCI.