Print

Email story

Comment

Email editor

Verizon may battle Qwest in bid for MCI, report says

NEW YORK - Verizon Communications Inc. has reportedly floated an informal counterbid to buy MCI Corp., offering about the same for the long-distance phone company as Qwest Communications Inc. in hopes that MCI management and investors would prefer a deal with a stronger company.

The potential offer, reported Thursday by the Wall Street Journal, marks another twist in a two-week frenzy of merger speculation prompted by SBC Communication Inc.'s deal to acquire AT&T Corp., and an almost yearlong effort by MCI to sell itself.

Verizon, which declined comment, has been steadfast that it doesn't need to make such an acquisition in response to the $16-billion AT&T buyout, which would make SBC a much more formidable rival.

MCI also declined to comment on the report, which came about a week after revelations the company has been discussing a $6.3-billion takeover by Qwest, the dominant local phone company across the Rocky Mountains and Pacific Northwest.

Although MCI's reputation remains tarnished by a widespread accounting scandal, and its business inflicted with the same ills as the rest of the long-distance industry, the company has some valuable assets for largely regional telephone companies like Qwest and Verizon.

Topping that list are MCI's national network infrastructure and its sizable base of customers, which number 15-million despite a sharp decline fueled by price wars and competition from cell phones and Internet-based calling.

Industry observers said the deal made sense for Verizon, which is a national player in the wireless sector and has struggled to build a clientele among large corporations with national communications needs.

Perhaps more important, MCI investors may have reacted poorly to the prospective Qwest deal, which would bring payment in shares of a company marred by scandals and a far weaker financial profile.

Qwest lost $1.66-billion during the first nine months of 2004, a period during which revenues fell about 4 percent to $10.37-billion compared with a year earlier. On the balance sheet, the company had debts of $17.2-billion at the end of September, vs. cash of about $1.81-billion.

Working in Qwest's favor is the widely held belief that Verizon would prefer to acquire Sprint Corp., which has a much healthier balance sheet than MCI, no scandal to overcome and a wireless operation that uses the same technology as Verizon Wireless.

[Last modified February 11, 2005, 00:51:12]