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Legg Mason's Miller Presses For Qwest Bid

MCI's response to Miller and other outraged shareholders is that the decision is not about money, it's about which company would make the better merger partner, a theme embraced in this column a few weeks ago.

But Miller says that's not the issue.

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"The question is not whether Verizon is a larger, more financially sound company that possesses assets, such as wireless, that Qwest lacks. It is and it does," he wrote in the letter to the MCI board. "The question is which transaction creates the most value for MCI owners."

Chiding MCI' s board for being timid about charting the company's future, Miller said: "The MCI shareholder base is manifestly a group that it not risk averse, owning as it does shares in a company that was the subject of the largest fraud and bankruptcy in U.S. history, a company operating in an industry plagued by overcapacity and a company whose revenue is shrinking with no clear end in sight."

Miller said the fact that MCI stock has been selling for more than the Verizon bid means people are buying MCI stock because they think it is worth more than Verizon wants to pay. And because they would be paid, in part, in Qwest stock, it also means that MCI shareholders are eager to invest in Qwest, he argued.

"As owners of over 240 million shares of Qwest, we have made a judgment that Qwest shares on their own . . . offer significant investment merit not well understood by the market. If we thought the shares of Verizon offered similar potential we would own them. We do not."

Miller makes an eloquent argument on behalf of shareholders of MCI -- and of Legg Mason Value Trust. But Qwest shareholders may really have the most to gain from Miller's quest for MCI.

As the smallest of the former regional Bell companies, Qwest is in a buy-or-be-bought situation. It needs a merger at least as much as MCI does.

As the second-largest shareholder of Qwest, Legg Mason needs a merger just as badly. And so does Miller. If Legg Mason's billion-dollar bet on Qwest and MCI doesn't pan out, his streak against the S&P will be threatened.

A postscript: While Legg Mason's 240-million-share stake makes it the second-largest shareholder of Qwest, the largest, with 300 million shares, is another familiar name in Washington: Philip F. Anschutz, the telecommunications entrepreneur who built Qwest and recently launched the Washington Examiner, a free daily newspaper.

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