Original URL: http://www.theregister.co.uk/2005/02/25/mci_verizon_qwest/

Qwest sweetens MCI offer

As expected

By Tim Richardson

Posted in Financial News, 25th February 2005 15:27 GMT

Qwest has sweetened its offer for MCI although it stopped short of increasing the $8bn (£4.23bn) bid currently on the table. The improved offer comes with certain additional assurances including guaranteeing the value of stock in the cash and paper deal.

In a letter Qwest chairman and chief exec Richard Notebaert called on the MCI board to reconsider the offer which, he said, was "even more compelling for your stockholders".

He said a Qwest/MCI merger would create "an exciting and important new telecommunications company, of which MCI would become a meaningful part" adding that a Qwest/MCI merger creates a "superior value opportunity for the MCI stockholders as compared to a Verizon/MCI transaction".

Last week, MCI announced that it had accepted a $6.7bn (£3.55bn) offer from Verizon. However, shareholders have questioned MCI's decision to accept an offer that was significantly lower than the one made originally by Qwest. Rebel shareholders are so unhappy at the deal that some have started court action accusing MCI directors of breaching their fiduciary duties - their legal responsibilities as board members.

News that Qwest has improved its offer comes as MCI reported a fall in Q4 revenues. Publishing results up to the end of December, MCI said revenues in the fourth quarter were $5bn - down 2 per cent compared to the previous quarter and a drop of 10 per cent compared to the same period last year.

Operating income for Q4 2004 was $434m, compared to an operating loss of $3.4bn in the Q3 2004 and an operating loss of $332m in Q4 '03.

Overall, revenues for the year were down 15 per cent from $24.3bn in 2003 to $20.7bn as the telco formerly known as WorldCom racked up an operating loss of $3.2bn. Looking ahead to 2005, MCI expects revenues to fall still further by up to 14 per cent to between $18bn - $19bn.

MCI boss Michael Capellas said the company had made "improvements in [its] financial performance in the face of difficult industry conditions". ®

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