MCI Mulls Qwest Bid

According to the WSJ, the MCI board is meeting to weigh the Qwest bid. MCI said last week that it would respond to Qwest’s latest bid by March 28, though a decision also could be announced this week, according to people close to the situation. Qwest’s bid is $5.25 a share higher than the accepted offer from Verizon. The size of that spread makes it difficult for MCI to justify staying with the current Verizon offer, some investors and lawyers say.

MCI still eventually could go with a deal from Verizon, even with a deal that is nominally lower than Qwest’s, since it would be seen as a less-risky deal. But the gap between the two offers must be narrower for MCI’s board to avoid the risk of shareholders voting it down.

Why this is important? Ideally the government will step in and stop this massive wave of consolidation. But that wont happen so here is my real-world analysis. I believe that consumers will be better off if the weaker of the two bidders is the winner. In this case Qwest who is already saddled with a good amount of debt. Verizon is in an amazingly competitive position and adding the MCI network to what is arguably one of the strongest service providers around is bad news for consumers. The fact that Verizon can bid over a billion dollars less than Qwest for MCI and still potentially win out speaks volumes about what the market thinks of Verizon’s future!

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