Qwest takes MCI bid to Wall Street

Carrier tells analysts that it sees its proposal as superior to Verizon's--and asks for their input.

Reuters

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March 31, 2005 8:01 a.m. PT

2 min read

Richard Notebaert
CEO, Qwest

Qwest Chairman Richard Notebaert said that his offer was clearly more valuable to short-term and long-term investors but that MCI's board had not responded to its offer, which Qwest revised on Thursday.

"Even if you think it's not superior, do you feel that (it has) the potential to be superior with some type of tweaking?" Notebaert asked analysts and investors. "There's no question in my mind that it has the potential to be there, because that's what the market is saying to us."

Qwest, the No. 4 U.S. local telephone company, said Monday it could generate cost reductions valued at $14.8 billion from a merger with MCI, the No. 2 U.S. long-distance company, including up to 15,000 job cuts.

Notebaert said annual costs of a merged Qwest-MCI could be cut by $2.5 billion to $2.9 billion. He also said the merger would allow it to use tax credits for earnings, saving another $2 billion. Qwest said the savings would trigger between 12,000 and 15,000 job cuts, equal to between 15 percent and 18 percent of the combined company's work force.

Qwest said 68 percent of savings from the deal would come from merging its cash-burning long-distance network with MCI's. Both Qwest and Verizon expect to spend billions reworking parts of MCI's network, which was built through dozens of acquisitions during WorldCom's heyday, but never fully integrated.



		Related story The end of a telecom icon An acquisition of MCI will mark the end of an era in the telephone industry.

MCI accepted the lower bid by Verizon in part because of its solid balance sheet and stronger growth potential, people familiar with the matter have said. MCI may meet with Qwest to discuss the suitor's revised takeover bid to assure shareholders it has explored all options and tried to clinch the best offer, sources familiar with the situation said Monday.

Qwest and Verizon, the largest U.S. telecommunications company, lobbed their first public salvos against each other on Monday, with executives trading criticism about the wisdom of their opponents' offers. Several large MCI shareholders urged Qwest to pursue its bid, saying the Verizon deal undervalues MCI.

Verizon has said its deal would generate cost savings and additional revenue valued at $7 billion, including 7,000 job cuts. It also expects to spend more than $3 billion to realize its savings.