RealTime IT News

Qwest Isn't Done Yet

Qwest resumed its dogged pursuit of MCI today, increasing its offer for the long-distance carrier and network services provider approximately $500 million to nearly $9 billion.

Qwest CEO Richard Notebaert presented the terms in a letter to MCI Chairman Nicholas Katzenbach. He also expressed "dismay" that MCI accepted a $7.67 billion bid from Verizon before checking back with Qwest.

"It is difficult to understand how the goal of maximizing value for MCI stockholders is served by consistently favoring one bidder over another, especially since it has only been our persistence, rather than a level playing field, that has significantly increased the value of MCI shares," Notebaert said.

Notebaert said Qwest remains committed to a merger with MCI. He believes its proposal is superior on price, synergies and ease of regulatory approvals compared to Verizon's merger plan. Notebaert said the latest offer was good until April 5 at midnight.

MCI, of Ashburn, Va., has been cool to Qwest, citing concerns about its financial stability. And the pact it entered into with Verizon this week makes it harder to drop that deal. If MCI backs out, it will have to pay the regional carrier a $240 million break-up fee.

Approaching MCI stockholders directly could be another option for Qwest. Several large MCI stakeholders were unhappy with directors' reluctance to consider previous offers from Qwest.

A spokesman for Carlos Slim, MCI's largest shareholder, told Reuters that both Verizon offers and Qwest's earlier bid were both too low. Slim holds 13.7 percent of MCI shares.

Denver-based Qwest has also reportedly hired The Altman Group, a New York proxy consulting firm, which could help it launch a hostile attempt.

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.