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.

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