Qwest Makes Second Grab For MCI

Qwest Communications Thursday modified its previously rejected offer to buy MCI for $8 billion, adding protection against dips in stock price.

Qwest's sweetened offer adds a "collar" that protects MCI shareholders against an up to 10 percent drop in Qwest's share value, according to a letter to MCI's board from Qwest Chairman and CEO Richard Notebaert.

The new offer does not modify the overall value of the bid.

Ashburn, Va.-based MCI said in a statement that its board would conduct a "thorough review" of Qwest's offer.

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A second MCI suitor, Verizon Communications, New York, last week said it would acquire MCI in a transaction valued at $6.7 billion.

Financial analysts had said Qwest's bid, though higher than Verizon's, was hampered by Qwest's financial standing, which includes considerable debt.

The new cash-and-stock offer values MCI at $24.60 per share, including $9.10 in cash and $15.50 in stock.

MCI investors are reportedly pressuring the telecommunications company to consider Qwest's offer before committing to being sold to Verizon.

Notebaert this week publicly flogged the pending Verizon/MCI merger, as well as a previously announced deal by SBC Communications to buy AT&T, as bad for competition.

"My concern, and I think the concern that the policy-makers should have, is that bigness does not equal better," Notebaert said in an interview with the Associated Press. In that interview, Notebaert said that if the two megamergers happen, SBC and Verizon would hold 80 percent of the market.

The stated prize of both the SBC/AT&T and Verizon/MCI deals is the acquired companies' lucrative enterprise customer base.

MCI has been trudging ahead with channel plans despite its pending purchase.

The news of the acquisition came less than a week after MCI announced a new Solution Provider Channel Program. The new program was designed to help MCI triple its indirect sales volume from levels seen six months ago, said Todd Gerdes, senior vice president of MCI's solution provider channel.

Even so, the merit of MCI's new partner program has been diminished by the looming takeover of the company by Verizon, which is not that great a partner to work with, said Emmet Tydings, president of AB&T Telecom, a master agent in Gaithersburg, Md. "To accommodate the MCI program, Verizon would have to completely do an about-face from the last couple of years," said Tydings.

Earlier this week, the company began selling managed services through Cisco Systems channel partners.

Jennifer Hagendorf Follett contributed to this story.