MCI Inc. on Wednesday rejected an offer from Qwest Communications International Inc. in favor of a lower bid that would allow Verizon Communications Inc. to acquire the long-distance telecommunications company.
MCI said in a statement it sought “improvements on financial terms, certainty of close and other merger terms,” but “Qwest immediately rejected virtually all of MCI’s requests and reaffirmed that its latest proposal is its current best proposal.”
“MCI’s board also took into consideration a number of uncertainties in terms of value and likelihood of closing, including the negative sentiment among MCI customers toward a Qwest combination,” the Ashburn, Va., carrier stated. “Other concerns centered on Qwest’s synergy assessments, as well as the risks associated with Qwest’s contingent liabilities.”
Qwest could raise its offer or seek approval from MCI shareholders, some of whom consider Qwest’s offer to be a more favorable deal, according to national media reports.
“MCI’s Board of Directors has chosen to reject what we believe is a superior offer to acquire MCI,” Qwest said in a statement. “The company is currently weighing its options and shareholders will dictate the next steps in this process.”
Qwest has offered to acquire MCI in a pact valued at $9.07 billion while Verizon’s bid is worth $7.64 billion.
Denver-based Qwest claims a combination with MCI would face less scrutiny before regulators. New York-based Verizon says MCI would be better off merging with a healthier company.
Verizon is the biggest U.S. phone company with $71.3 billion in annual revenue and a market value of $99 billion. Qwest, a regional phone company in 14 states from Iowa to Washington, posted 2004 revenue of $13.8 billion and is valued at approximately $7 billion.
Amid a frenzy of planned mergers, Verizon and Qwest are sparring over the rights to acquire a company whose sales dropped 15 percent last year to $20.7 billion in the face of heavy competition.
SBC Communications Inc., the second largest local phone company behind Verizon, plans to acquire MCI’s traditional rival, AT&T Corp., which also has faced falling sales over the years.
