Qwest to MCI: Why Not Us?

Qwest posed a simple question to MCI today: Why is Verizon’s $6.7 billion merger offer better
than Qwest’s $8 billion bid?

“We’re looking for some feedback,” Qwest CEO Richard Notebaert said during a meeting with financial analysts today.

Qwest submitted a revised proposal for the long-distance and network
services provider last week. But Notebaert has had to divine MCI’s
intentions from press reports. MCI issued a brief statement saying it would study the latest offer.

The leader of the Denver-based regional telecom said he wants to cut out the “media middlemen” and get MCI to the negotiating table, where Qwest could address any concerns it might have about the offer directly.

“If nothing else, [Qwest asking for a meeting] represents a willingness to get some guidance,” Notebaert said. “How would [MCI] define a superior deal?”

Notebaert brushed aside questions about taking the offer directly to MCI shareholders, some of whom have expressed a preference for Qwest’s offer.

“It’s speculation at this point, it serves no purpose,” Notebaert said. “This is business and we’ve tried to be very professional.”

Notebaert spent much of the conference reiterating his case for a Qwest-MCI combination. In addition to offering a higher price than Verizon, Qwest maintains that it would be better for the industry to have three major telecom companies — SBC-AT&T, Qwest-MCI and Verizon.

“It’s a public policy issue, I don’t think we want a duopoly,” Notebaert said. “Having three [telecom service providers] is important if you’re an enterprise customer.”

He believes Qwest-MCI would also be able to roll out new services, including consumer Voice over Internet Protocol where upstart Vonage currently has an edge.

With the combined reach and fiber network of Qwest-MCI, Notebaert said he believes the company could be a strong VoIP player. The company already provides VoIP for business customers in 200 cities, he said.

Notebaert, who also said Qwest’s $16 billion in debt should not concern MCI, given the potential revenues and earnings of a combined company, also said Qwest has contingency plans if it fails to convince MCI’s leadership to accept its offer.

“We have a plan “B” and plan “C” and we’ve looked at that,” he said. “But we view this opportunity as high-value. We have high hopes that this opportunity will bear fruit.”

Today’s meeting with investors is the latest in pursuit of Ashburn,
Va.-based MCI. Yesterday, a Verizon executive refuted several claims made by Qwest in an attempt to keep MCI directors and shareholders behind Verizon’s own deal to acquire MCI.

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