MCI weighs Qwest bid, talks with Verizon
Telecommunications giant, now out of bankruptcy, is in talks that could lead to its acquisition, according to sources.
Although MCI, which emerged from bankruptcy last year, has been looking for a buyer for months, interest in the company intensified after long-distance service rival AT&T last week agreed to be acquired by SBC Communications for $16 billion, the sources said.
Long-distance phone companies have been slammed by eroding long-distance revenue, price wars and competition, but they serve the high-spending corporate customers that the Baby Bells want to tap.
MCI is weighing Qwest's proposal, but a deal is not certain because it may hold out for a higher offer from other potential suitors, one source said. Qwest may walk away if the price for MCI gets too high, the source said.
Verizon has not made a formal takeover offer for MCI, but the two companies have held preliminary merger discussions, the sources said.
A deal with MCI would run counter to Verizon's past strategy, which was to build its corporate-services business on its own. Last week, Verizon Chairman Ivan Seidenberg declined to comment on whether the company would jump into the active merger scene.
In the wake of the SBC-AT&T news, Seidenberg said "nothing I've heard...will change, basically, the importance we've placed on the enterprise market and the strategy we've selected to pursue at this point."
MCI and Verizon declined to comment. Qwest could not be reached for comment.
The Wall Street Journal, which first reported the bid from Qwest, also said MCI's largest individual shareholder, Carlos Slim, is considering a plan to take MCI private.
MCI emerged from bankruptcy after reorganizing in the wake of an $11 billion accounting scandal. Meanwhile, Qwest also faced its own accounting probe and financial problems.
Marrying the two companies would reduce the competitors in the long-distance telephone and data market, which would ease the price wars that have battered the industry, analysts said.
Yet among potential partners, Qwest is seen as a weaker option because it lacks the high volume of customers and wireless services that Verizon would provide, analysts said.
The deal would face regulatory scrutiny, but less intense than the review of the pending SBC-AT&T deal, analysts said.
"This merger would be between smaller, struggling entities, and is not a partial re-creation of the old Bell system," Lehman Bros. analyst Blake Bath said.