[March 1, 2005]

Jane Austen on the MCI Merger

By David Sims, TMCnet CRM Alert Columnist

All that’s definite is that MCI is going to be acquired by someone – and that jobs will be lost. Whether that’s the attractive Verizon or the determined Qwest is to be seen. We turn to English novelist Jane Austen to understand exactly what’s going on here.

When this reporter began covering customer relationship management in the late 1990s, his entire experience in the industry had been as a customer. As it turns out, that was enough, as CRM kept his family in diapers and beer for the next few years.

Looking at this MCI-Qwest-Verizon menage-a-trois we have going on in the news, instead of an MBA or years as a telecommunications industry observer, he finds himself drawing on the Jane Austen movies he’s seen over the years.

(Yes, he was an English major. No, he didn’t read them, but a lot of girls he knew did.)

Because what we have here, folks, is nothing but a Jane Austen novel. We have MCI, an attractive girl “with prospects” (and the inheritance of Ashdown Manor, amazing what considerable dowries do for a gal’s looks) of marriageable age, being courted by two gentlemen – Mr. Verizon, a nice, stable young man with a bright future who seems to have captured her heart, and Mr. Qwest, rather swarthy, risky fellow with more money and more desire for her hand, but with a murkier future, who nevertheless seems to be the one her parents – shareholders – favor:

Today’s news is clear indication that Qwest is not giving up its courtship. Reading further in Qwest Communications International Inc.’s sweetened $8 billion bid to acquire MCI one finds that the deal would cut up to 15,000 jobs. Verizon Communication Inc.’s deal, the one MCI has tentatively accepted, would throw far fewer people out of work, the Associated Press is reporting this morning.

Qwest would want between 12,000 and 15,000 positions cut from a combined Qwest-MCI work force of about 81,000 workers, whereas Verizon is projecting about 7,000 positions axed.

Jane Austen would understand this as MCI, being a kind-hearted, virtuous young lady, worrying about which suitor would throw more servants out of work after the wedding. “That’s a lot of gifts to wrap,” she thinks as she listens to Qwest’s figures.

“The proposed cuts were detailed in a presentation which Qwest officials planned to deliver at a meeting with investors Tuesday morning to argue the case for its renewed $8 billion bid to buy MCI,” the AP reports. Qwest is arguing that the deal could be nearly twice as valuable to MCI shareholders as Verizon’s.

Austen would say Qwest, desperate for Ashdown Manor to rescue himself from his gambling debts, realizes it has not captured the lady’s heart by chunking a larger bag of gold on the table – but Qwest notices that her parents sit up a bit straighter and cut their eyes at each other. Qwest grins, and mentions that the price for that house in London’s St. John’s Wood which has just been out of their reach is sitting on the table “should the young lady do me the honour of marriage.”

Denver-based Qwest, the local phone company for most of the Rocky Mountains and Pacific Northwest, clearly is more desperate than Verizon to acquire MCI. They’ve embarked on an aggressive campaign over the past week to break up the $6.7 billion Verizon deal, which MCI agreed to despite a lower price.

As Austen explains it’s flattering to be ardently pursued, at times beyond the bounds of good taste by a wealthy suitor, but a girl knows where her heart is. She wishes her parents would forget about the money and just let her enjoy a happily-ever-after with Mr. Verizon, who loves her for herself, and not Ashdown Manor, whereas all Mr. Qwest wants to talk about is the manor and its profitable potential.

“The Qwest presentation, posted late Monday on Qwest's Web site, detailed potential cost savings of more than $10 billion over the first four years after the proposed merger with MCI,” the AP reports. Qwest has also promised to speed up the cash payoff to MCI investors and provide downside protection on the stock portion of the deal by offering to increase the amount of Qwest stock paid if the market value of those shares declines.

Austen would have written this scene as Qwest sitting up late at night over port with MCI’s parents telling them how much more efficiently he’d run Ashdown Manor, how much more money he could make with it and how swiftly and generously he would be able to “thank” the parents for helping their daughter make the right decision.

The reason the higher cash offer – about $1.3 billion higher, a lot of money to leave on the table – wasn’t accepted by MCI’s board is that Qwest's “vastly inferior financial and strategic health,” according to the AP, make them the riskier option.

“But we don’t know where his money comes from! We don’t know what he does!” MCI sobs as her parents try to convince her to marry the dashing Mr. Qwest. “No, but we know he has it,” they say. “Dear, we only want you to be happy.”

Early indications are that MCI’s board of directors will evaluate the revised Qwest bid, but probably stick with the Verizon merger for the more positive long-term value.

Of course in the end, Austen knows, MCI must marry Mr. Verizon and her parents will be crying when they see how in love the two are, and Mr. Qwest, on horseback overlooking the joyous wedding scene from afar, must ride furiously away over the heath as he mutters about the men on his trail about those debts….

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