MCI, Qwest edging toward deal?

Long-distance carrier, Baby Bell could reach an agreement as early as next week, according to reports.

Dawn Kawamoto
Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
2 min read
Qwest Communications International and MCI may strike an acquisition agreement as early as next week, should no other suitors come calling for the long-distance carrier, according to published reports.

But the jury is still out on whether BellSouth or Verizon Communications will also make a play for struggling MCI, as the telecommunications industry undergoes a rapid re-evaluation as to who should team up with whom, in the wake of SBC Communications' announcement earlier this week that it would buy AT&T for $16 billion.

Qwest is interested in acquiring MCI for $6 billion, according to a story published Thursday in The Wall Street Journal. And a report in The New York Times on Friday notes that a deal may come as early as next week, should MCI fail to attract offers from BellSouth or Verizon.

Analysts such as Scott Cleland, chief executive of independent research company The Precursor Group, said such consolidation in the industry is inevitable. Cleland, in an interview earlier this week with CNET News.com, said he expected MCI to follow a similar path as AT&T, as the telecommunications companies face the prospect of having to invest billions of dollars to move from their circuit-switched networks to Internet Protocol.

"In an IP world, voice is easy and cheap," Cleland said. "The traditional telecom companies are an anachronism."

The Baby Bells are also interested in snagging large, lucrative corporate-customer accounts. But without a national or global presence, and in the absence of a strong brand name, it's difficult to break out beyond their regional customer bases, analysts say.

That fact has made AT&T and MCI attractive acquisition candidates in this rapidly consolidating industry.