[April 11, 2005]

MCI to Qwest: "That All You Got?"

By David Sims, TMCnet CRM Alert Columnist

According to Newsday, in a deal finalized over the weekend Verizon Communications Inc. will pay investor Carlos Slim Helu $1.1 billion for his 13 percent stake in MCI Inc. to fend off a competing bid for MCI by Qwest Communications International Inc.

Verizon agreed Saturday to pay $25.72 in cash for each of Slim's 43.4 million shares. That's more than the $23.10 a share, or $7.51 billion, it has offered for all of Ashburn, Va.-based MCI's stock.

“He was the biggest question mark in this deal,” Jeff Kagan, an independent industry analyst told The New York Times. “This puts the deal squarely in Verizon’s camp. It was getting too complicated and this uncomplicates it.”

Also over the weekend Qwest refused MCI’s request to increase its existing $8.9 billion bid, the offer MCI has already rejected in favor of a $7.5 billion bid from Verizon, according to The Denver Post. Qwest refused to go higher, a source familiar with the matter said Sunday, telling MCI to take another look at the existing offer, which comes to $27.50 per MCI share.

"Qwest isn't going to bid against itself," the source said.

In a statement Saturday, according to Rocky Mountain News, Verizon's Seidenberg called the stock purchase from Slim a "unique" opportunity and "important step forward in our acquisition of MCI."

Seidenberg also indicated an increase could be in store for the rest of MCI's shareholders, saying the company would "continue to assess the situation as we move toward a vote by the MCI shareholders."

While other MCI stockholders are likely to complain and request equal treatment, it's not uncommon for a premium to be paid for a strategic stockholder block.

Sources close to Qwest told The Denver Post over the weekend that Qwest has the cash and financial backing to boost its bid for MCI to $30 a share, or $9.75 billion. But Qwest chief executive Richard Notebaert reportedly declined a request from MCI last week to go that high.

According to The Post, taking Slim out of the picture appears to give Verizon an edge over Qwest in the fight for MCI, yet other MCI shareholders are angry that Slim will receive more than the $23.10 per share cash-and-stock offer that is part of Verizon's merger agreement with MCI.

Legg Mason Capital Management's Bill Miller, who holds 1.7 percent of MCI shares, told MCI chief Michael Capellas in a letter Saturday that shareholders would be "outraged" if the board doesn't insist that all shareholders receive the $25.72 per share cash price Slim has agreed to take from Verizon. Legg Mason also owns 13 percent of Qwest shares

David Sims is contributing editor and CRM Alert columnist for TMCnet.

To discover how contact centers can save money and increase productivity by making the switch to IP Telephony, be sure to attend TMC's IP Contact Center Summit May 24-26, 2005, in Dallas, Texas. IP Contact Center Summit is co-located with the Speech-World conference, where you can get expert guidance in the deployment of speech technologies to strengthen customer relationships.