More MCI Madness

April 24, 2005

I'll tell you; this saga has more twists and turns than a small intestine. After yesterday's podcast when we were pretty sure that MCI would tell Qwest to jump in a lake, it turns out MCI really does take Qwest seriously. They have decided to accept the 9.75 billion dollar takeover bid according to the AP.

Verizon now has five days to respond and can boost its offer again or walk away with a nice financial penalty.

MCI directors have repeatedly expressed concern about Qwest's $17 billion debt load and the long-term value of the Qwest shares MCI investors would receive as partial payment. The MCI board also has questioned whether Qwest can meet its forecast of nearly $3 billion a year in cost savings from the proposed merger.

Qwest's $30-per-share offer consists of $14 in Qwest stock and $16 in cash - an increase of $2.50 in cash compared with its prior offer.

The Verizon deal valued MCI at $23.10 per share, though two weeks ago it agreed to pay nearly $26 a share for a 13.4 percent stake in MCI from Mexican billionaire Carlos Slim Helu. That gambit fueled speculation that Verizon would offer at least that much for the rest of MCI's stock.

I am just hoping this story will go away. It was fun to cover for a while but the molasses-in-July-like back and forth movement is like watching a tennis match in slow motion. I hope Qwest wins this war as I have the consumer's best interests in mind and being the weaker of the two companies, a Qwest merger would mean the market won't be dominated by a single giant in Verizon.

If the story takes one more intestinal twist and Verizon becomes the winner, it will be the consumers who will feel the droppings of this merger on their heads. My suggestion? Wear a hat.

More MCI Madness

Communications and Technology Blog - Tehrani.com

More MCI Madness