RealTime IT News

A Continuing Qwest For MCI

UPDATED: Verizon today threatened to drop out of the MCI sweepstakes if the long-distance carrier indicates a preference for Qwest's higher bid.

"If the MCI Board . . . 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," Verizon CEO Ivan Seidenberg said in a letter to MCI directors. "Should this occur, we would no longer be interested in participating in such a process."

Seidenberg's letter came after Qwest presented MCI with proof of financing documents. The paperwork was meant to prove Qwest has the financial resources to buy MCI and "compete aggressively for new customers, make necessary capital improvements and continue to expand next-generation services" once the deal closes.

Qwest recently upped its offer to $8.9 billion in an attempt to scuttle Verizon's $7.6 billion agreement for the Ashburn, Va., long-distance and network services provider.

Qwest CEO Richard Notebaert has also been ratcheting up the pressure on MCI's directors, constantly and publicly reminding them of their fiduciary responsibility to shareholders and implying that they have failed to properly evaluate the offers.

"We urge the MCI board to cease its favoritism, stop attempting to tilt the regulatory playing field and run a fair, transparent, complete and timely sales process," Notebaert said Friday in a letter to MCI's board.

Such rhetoric won't endear Notebaert to MCI's board, but that's not the point. It's aimed at MCI shareholders, many of whom have voiced displeasure with the board's preference for the lower Verizon bid.

"We note with interest that some of MCI's largest shareholders consider our offer to be superior," Notebaert said. "We believe that any attempt to deny shareholders the value we are offering would be a dereliction of fiduciary duty on the part of MCI's board."

Qwest said its latest offer expires tomorrow, although the Denver regional carrier would surely extend the timetable if it received some encouragement from MCI.

Qwest and Verizon covet MCI because of its large IP data-service deals with government agencies and corporations. And with the pending merger of SBC and AT&T , neither wants to be left behind by the wave of industry consolidation.

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