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Verizon Sits but Still Could Buy MCI

By Yuki Noguchi
Washington Post Staff Writer
Saturday, April 30, 2005; Page E01

Verizon Communications Inc. yesterday let a deadline pass to increase its bid for MCI Inc., although the New York-based telecommunications giant has other means of raising its offer if it wants to try to block rival Qwest Communications International Inc. from winning the bidding war.

In February, Verizon secured an agreement to merge with Ashburn-based MCI. But in the following weeks, Qwest repeatedly raised its offer, and last week MCI's board declared Qwest's offer of $9.74 billion superior to Verizon's bid of $7.65 billion.


Verizon let yesterday's deadline to raise its offer to MCI's board pass. (Charles Dharapak -- AP)

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MCI Calls Qwest's Latest Bid 'Superior' (The Washington Post, Apr 24, 2005)
Qwest's Revised Bid Expires Today (The Washington Post, Apr 23, 2005)
Qwest Raises Its Bid for MCI A Third Time (The Washington Post, Apr 22, 2005)
Story Archive and Company Background

Under the terms of its original merger agreement, Verizon had five days, or until yesterday, to make a counteroffer. With that deadline expired, MCI's board of directors now has until midnight Monday to recommend the Qwest deal to its shareholders if no counterproposal is made.

Verizon could increase its offer by that midnight deadline, or it could wait even longer and take a higher bid directly to MCI shareholders. Verizon has already filed the necessary paperwork with the Securities and Exchange Commission and has the right to require MCI to hold a shareholder vote on its deal, even if MCI's board decides to pursue Qwest's offer. A shareholder vote on the Verizon deal could take place as early as June, and the company could raise its offer shortly before the vote.

If Verizon decides to walk away from the deal, it could collect $250 million in breakup-related fees.

Qwest, which is a much smaller and financially weaker firm, is offering a higher cash premium to acquire MCI and has promised to cut greater costs and as many as 15,000 jobs out of a combined company. Verizon, meanwhile, has more to invest in MCI but may want to stake more of its future on the rapidly growing wireless and high-speed Internet businesses. Verizon spokesman Eric Rabe declined to comment on Verizon's plans, and Qwest spokesman Tyler Gronbach also declined comment.

But in a release, Denver-based Qwest said yesterday that its proxy adviser had determined that holders of more than 50 percent of MCI's shares support Qwest's proposed $30-per-share deal. Moreover, the shareholders would continue to support that deal, even if Verizon raises its bid to $25.72 per share, which is the same amount Verizon recently agreed to pay to acquire a 13.4 percent stake in MCI from its largest shareholder, Carlos Slim Helu.

MCI spokesman Peter Lucht declined to comment.

The merger fight over MCI is part of a broader consolidation among telecommunications companies, with Sprint Corp. and Nextel Communications Inc. planning to combine, and AT&T Corp. being swallowed by SBC Communications Inc. Qwest, the smallest of the regional phone service providers, needs to merge with MCI to break out of its 13-state base and compete with the larger companies.


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