RealTime IT News

Qwest Bids Bitter Goodbye to MCI Pursuit

Qwest has left the MCI sweepstakes, but it didn't go quietly.

The Denver regional carrier this afternoon said it "isn't in the best interests of shareholders, customers and employees to continue in a process that seems to be permanently skewed against Qwest."

"It appears that MCI's board of directors has surrendered control of the bidding process once again," Qwest said. "By accepting a lower offer, without even contacting Qwest, and by reportedly allowing Verizon to instruct MCI to impugn Qwest, it is only fair to conclude that MCI is more interested in bending to Verizons will than serving its shareholders."

The announcement rules out the possibility that Qwest would take its case directly to MCI shareholders in a hostile takeover attempt.

Qwest threw in the towel just hours after the Ashburn, Va., long-distance and enterprise network services provider deemed Verizon's latest $8.4 billion ($26 per share) offer superior to Qwest's $9.7 billion ($30 per share) proposal.

MCI officials listed several factors they say compensate for the $1.3 billion difference, including Verizon's wireless assets, lack of debt and feedback from its corporate and government customers.

In response, Qwest defended recent efforts around wireless, DSL and VoIP, as well as reiterated its synergy estimates. Qwest said it would go into more details during tomorrow's quarterly conference call.

It also signaled that it isn't done trying to expand its national presence through acquisition, while at the same time lashing out at pending industry mergers.

"The proposed industry mega-mergers will undoubtedly reduce customer choice," Qwest said. "To better protect the interests of customers, the market requires multiple, robust competitors committed to ensuring that innovation and value remain inherent in America's telecommunications marketplace."

Verizon and MCI will move forward with regulatory filings, and Qwest is expected to oppose the planned merger. The process will likely take 12 to 18 months to complete.

Despite suffering through an accounting scandal that drove it into bankruptcy, MCI was coveted for 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.