Analysts Skeptical of Qwest Claim

UPDATED: Qwest CEO Richard Notebaert yesterday laid out
reasons why MCI should accept his company’s takeover
offer over Verizon’s bid.

Besides a dollars-and-cents argument, Notebaert contended that a merger with
Qwest would clear the regulatory process in less time than a Verizon-MCI
combination.

“Qwest’s proposal is superior to the Verizon proposal because our regulatory
approval process is likely to be completed at least six months more
quickly,” Notebaert said in a letter to MCI Chairman Nicholas Katzenbach.

Richard Notebaert

Richard Notebaert
Source: Qwest

Notebaert did not present a rationale for the claim and a spokesman for the
Denver Baby Bell was not immediately available.

“After an exhaustive review of the alternatives on the table, we’re very
confident that our board made the right decision for our shareholders,
customers and employees,” MCI spokesman Peter Lucht said.

Some telecom industry-watchers don’t agree with Qwest’s timetable, citing
complexities of the proposed deals and the unpredictability of the
regulatory approval process.

It’s not unusual for mega-mergers to take more than a year to wend their way
through the Federal Communication Commission (FCC), Department of Justice
(DoJ) and state utilities reviews.

“We are skeptical of Qwest’s arguments that it could be expected to usher a
proposed merger with MCI through the government review process six months
quicker than Verizon could,” Legg Mason analysts said in a research note
this morning. “Predicting the timing of such reviews is even more difficult
than predicting the outcomes.”

The analysts said Qwest has some timing arguments in its favor, but a number
of factors are the same. Both would involve competitive issues and take place
at a time of multiple deals in the industry, as the FCC leadership and
staff is changing. What’s more, objections from consumer groups or
competitors could drag out the process.

“The most likely outcome is that both deals would travel a complicated, but
similarly long, path to approval, with conditions,” Legg Mason said.

In other regulatory news, The Financial Times reported today that SBC
will file regulatory documents next week in support of its
$16 billion purchase of AT&T .

Some of the regional carrier’s arguments, the paper said, are the uncertainty
of the AT&T future if the merger fails and the ability of SBC to bring advances
from AT&T’s research and development lab to consumers.

Jim Wagner contributed to this report.

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