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RealTime IT News

Qwest For MCI Rewarded

In recent weeks, MCI has spurned Qwest's merger offers, choosing instead to stick with a lower bid from Verizon .

That finally ended this weekend.

The Ashburn, Va., long-distance and network services provider deemed Qwest's $9.7 billion cash and stock proposal superior to Verizon's $7.6 billion plan -- something that was obvious to many MCI shareholders.

Denver-based Qwest, which had been exasperated by Verizon's intransigence, said it was "gratified" by the decision and would begin filing paperwork for regulatory approvals needed for the latest telecom maga-merger.

But it's unlikely Qwest has heard the last of Verizon. Under an earlier agreement with MCI, Verizon has five business days (through Friday) to respond with a revised offer.

"In light of the change in this process, we will consider all of our options and determine how best to serve Verizon shareholders," Verizon said in a statement.

The New York carrier also noted that its previous pact contains a break-up fee. If MCI bails on Verizon, it will have to pay the Baby Bell a $240 million fee.

Although it tried to avoid a bidding war, Verizon has made it clear it's serious about purchasing MCI. For example, when MCI's largest shareholder balked at the per-share offer, Verizon negotiated a higher price to gain his 13 percent stake in MCI. The end-around chaffed some MCI shareholders.

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.