Qwest For MCI Rewarded

In recent weeks, MCI has spurned Qwest’s merger offers, choosing instead to stick with a lower bid from Verizon
.

That finally ended this weekend.

The Ashburn, Va., long-distance and network services provider deemed Qwest’s
$9.7 billion cash and stock proposal
superior to Verizon’s $7.6 billion plan — something that was obvious to many MCI shareholders.

Denver-based Qwest, which had been exasperated by Verizon’s intransigence, said it was “gratified” by the decision and would begin filing paperwork for regulatory approvals needed for the latest telecom maga-merger.

But it’s unlikely Qwest has heard the last of Verizon. Under an earlier
agreement with MCI, Verizon has five business days (through Friday) to
respond with a revised offer.

“In light of the change in this process, we will consider all of our options
and determine how best to serve Verizon shareholders,” Verizon said in a
statement.

The New York carrier also noted that its previous pact contains a break-up
fee. If MCI bails on Verizon, it will have to pay the Baby Bell a $240
million fee.

Although it tried to avoid a bidding war, Verizon has made it clear it’s
serious about purchasing MCI. For example, when MCI’s largest shareholder
balked at the per-share offer, Verizon negotiated a higher price to gain his
13 percent stake in MCI. The end-around chaffed
some MCI shareholders.

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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