MCI dumps Verizon, cuddles up to Qwest
Plenty more telcos in the sea
Verizon is plotting its next move after MCI switched allegiances over the weekend and decide that it would back a bid after all to be snapped up by Qwest.
Last week US telco Qwest upped its offer to acquire MCI to $9.75bn - or $30 a share - and gave MCI until teatime Saturday afternoon to accept or reject the offer.
On Saturday, a thin trail of white smoke was seen coming out of MCI's offices in Ashburn, Virginia, signalling to those who had nothing better to do than hang around its offices that the US telco had made a decision.
Deciding to dump Verizon, the company formerly known as WorldCom said: "MCI, Inc. today announced that its Board of Directors has determined that Qwest Communications International Inc.'s latest offer to acquire the Company is superior to the terms of the current MCI/Verizon merger agreement."
Unable to withhold its glee that, after weeks of rejection, it had finally managed to wrestle MCI away from Verizon, the Denver-based company said: "Qwest is gratified that MCI has recognized its superior offer for MCI. Through this combination, both the fundamental economics and the future competitive landscape of the telecommunications industry can be aligned to deliver long-term value for investors, robust competition and better services for customers.
"We expect MCI to build upon its declaration of superiority with specific acts of support, including expeditiously seeking regulatory approvals of a transaction that it considers superior and in the best interests of its shareowners."
Of course, this isn't necessarily the end of the matter. Verizon has until the end of the week to come up with a new offer and reports from the US suggest that it might just do that.
Or, instead of upping its $7.5bn offer, it could hold out for a shareholder vote and try and win that instead. Then again, it could walk away from the deal and cash-in on $240m in break-up fees and up to $10m in expenses.
Whatever route it opts for, Verizon was unable to hide its disappointment. Trying to fathom the reason why it had been dumped, Verizon reasoned that MCI has "apparently concluded that the difference was sufficient compensation for the increased risks" with a hook up with Qwest.
It went on: "Verizon believes its pending transaction with MCI creates long-term, as well as short-term, value for the shareholders of both companies by protecting the integrity of MCI's business, ensuring that MCI's customers have continuing access to the best communications services, retaining key employees, and stabilizing MCI's financial position and prospects." ®
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