MCI War: Verizon Claims Victory

After three months of bidding against fellow MCI suitor Qwest Communications, Denver, Verizon last week won the object of its desire with an $8.5 billion cash and stock offer for the Ashburn, Va., company. Although the Verizon bid was about $4 per share lower than Qwest's, MCI called Verizon's offer "superior to the offer received from Qwest."

Qwest displayed some bitterness with MCI's decision. In a statement issued that day, Qwest said, "It is only fair to conclude that MCI is more interested in bending to Verizon's will than serving its shareholders."

From the start of the bidding war in February, financial analysts disagreed with Qwest's position that its bid for MCI would be best for MCI's shareholders. Qwest's heavy debt load and underperformance in the long-haul communications sector meant that "Qwest-MCI is a dubious proposition," said Victor Schnee, president of Probe Financial Associates, Ironia, N.J.

At least one Qwest partner saw it differently. Emmet Tydings, president of AB&T Telecom, a master agent in Gaithersburg, Md., said he would have preferred to see Qwest win MCI. "Qwest knows how to perform in channels," said Tydings. "Verizon has a very narrow, low-population channel program."

MCI said business would continue as usual while federal regulatory agencies begin the merger's approval process. MCI spokeswoman Janet Brumfield declined to comment on the transition that current MCI partners would face once the Verizon deal closes.

Formerly known as WorldCom, MCI has battled heavy competition and bankruptcy after financial scandals. Still, it owns a valuable enterprise customer base and a significant global communications network. Those prizes should give Verizon a relatively quick return on its investment, said Angus Dougherty, president of wireless provider and consultancy AirCover Network Solutions, Thornton, Colo.

"Verizon got MCI cheap," Dougherty said. Earlier this year, SBC Communications said it would acquire AT&T for $16 billion.