Qwest Blasts MCI Over Disconnected Talks

Qwest CEO Richard Notebaert is seething because acquisition
talks with MCI have “gone dark.”

It’s the latest in an increasingly acrimonious fight between Qwest and
Verizon for the Ashburn, Va., long-distance and network
services provider.

In a letter to MCI directors, Notebaert said “there is no legally valid
excuse not to continue the exchange of information.” He urged MCI to “engage
in negotiations to finalize the proposed merger agreement we provided to
your advisors on March 16.”

MCI said it will respond to Qwest’s sweetened $8.45 billion offer by March
28; however Qwest expected talks to continue until that deadline.

Qwest still has questions about tax issues that could be easily answered if
the parties resumed talks, Notebaert said. The Denver telecom also wants to
talk with Richard Breeden, who was tapped to
put MCI back on ethical footing after its historic accounting scandal about
internal controls.

But Notebaert saved his harshest criticism for rival bidder Verizon, which
still appears to be MCI’s preferred merger partner despite a lower offer of
$6.7 billion.

Verizon “continues in its shrill attempt to change the focus away from
delivering maximum value to MCI shareholders, but ignores the one
overriding issue: Qwest’s offer is over 25 percent higher than Verizon’s
offer,” Notebaert said in his letter.

For its part, Verizon sent its own letter yesterday to MCI laying out reasons “why the Qwest offer is not what it purports to be,” Peter Thonis, a Verizon
spokesman, said.

“While we certainly sympathize with Qwest management’s plight and understand
their desperation given Qwest’s circumstances, we nevertheless feel
compelled to again express our view that its proposal is profoundly flawed
and its claims unsupportable,” Verizon said in its letter.

Qwest’s figures about synergies of a combined Qwest-MCI are overstated,
Verizon contends. It also takes issue with Qwest’s statement that a
Qwest-MCI merger could win regulatory approval sooner than Verizon-MCI.

Qwest and Verizon covet MCI because of its large IP data-service deals with government agencies and corporations. Aand with the pending merger of SBC and AT&T , they don’t want
to be left behind in the wave of industry consolidation.

The Baby Bells see those long-term, high-margin contracts as crucial to
their future prosperity, as cable operators, VoIP upstarts and wireless
carriers try to hone in on their traditional businesses.

Qwest’s aggressiveness is likely a result of concern over being
marginalized. The company has 15.5 million access lines, 1 million DSL
lines and 4.6 million long-distance customers, mostly in the Midwest and
Western United States.

In a recent research note, Bryan Van Dussen, an analyst with Yankee Group,
said Qwest has limited options to grow by acquisition if it can’t sway MCI.

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