"[I]n a complete abdication of its duties to act in the best interest of its shareholders, MCI can be forced to submit the Verizon offer to a shareholder vote even if the MCI Board recommends against the Verizon offer because MCI has received a Superior Proposal," Notebaert wrote.
Privately, sources close to the company said Qwest is considering a hostile takeover and has retained a proxy adviser in case it decides to solicit shareholder support to replace MCI's board.
Qwest, with headquarters in Denver, would be dwarfed and disadvantaged by a combined MCI-Verizon, its chief executive has argued.
(David Zalubowski -- AP)
"The new offer was determined after Qwest received input from MCI shareholders," said Qwest spokeswoman Claire Mylott.
MCI spokesman Peter Lucht said the board acted in accordance with corporate-governance rules. MCI, formerly known as WorldCom Inc., is overseen by a court-appointed monitor because of a massive accounting scandal that forced it into bankruptcy. "Our board will review Qwest's latest offer and respond accordingly," Lucht said.
Wall Street analysts have said an MCI-Qwest deal is strategically inferior to a merger with Verizon, which has a bigger portfolio of telecommunications products such as wireless phones, and a more desirable network centered in the most lucrative business markets in the Northeast.
"Qwest is fighting hard because they're desperate. They have no free cash flow and lots of debt," said F. Drake Johnstone, an analyst with Davenport & Co.
Qwest has less than $2 billion in cash. Last year, it lost money as it came under pressure from competition for corporate customers and lost local phone customers. The company laid off 12 percent of its staff, or 5,500 people.
In a Wall Street Journal opinion piece published Feb. 28, Notebaert argued against the combinations of MCI and Verizon and SBC Communications Inc. and AT&T Corp.
"The reality is that this scale, pricing power and overall market clout make it extremely unlikely that any other player can grow market share," Notebaert wrote. "Odds are these behemoths would not compete head-to-head in most local markets but would instead flex their muscles to squeeze out smaller competitors, emptying the playing field."
Qwest's latest offer consists of $13.50 a share in cash and dividend payments and $14 a share in Qwest stock, for a combined offer of $27.50.
Verizon's winning offer included $8.35 a share in cash and dividends plus $14.75 a share in Verizon stock, for a total of $23.10.