TMCnet News
The Eastern Management Group Releases Financial Analysis of New Qwest Bid for MCIBRIDGEWATER, N.J. --(Business Wire)-- March 17, 2005 -- According to a new report released today by The Eastern Management Group, the increased premium offered by Qwest for MCI along with its outstanding obligations may lead to a liquidity crisis if the merger between the two companies goes through. Furthermore, the report suggests that current estimates of corporate synergies are significantly overestimated resulting in even greater risks of economic problems down the road. The report, entitled "Critical Implications of the Proposed Qwest-MCI Merger: A Financial Analysis," is available on the company's Web site, located at http://www.easternmanagement.com/. "We foresee a liquidity crisis at Qwest-MCI based on the premium paid to MCI shareholders, lingering MCI bankruptcy issues, costs to unlock synergies, and hundreds of millions in unconditional purchase obligations for unnecessary capacity in Qwest's long distance business," said Paul Robinson, vice president of The Eastern Management Group. "In order to sell the deal to the industry, regulators, and shareholders, Qwest has overestimated synergies between itself and its competitor MCI and underestimated integration costs to make the deal look rosier than it really is." Both Qwest and Verizon are currently in talks to acquire MCI Communications, the Ashburn, VA-based company, formerly known as WorldCom. The Eastern Management Group, a management consulting firm with over 400 clients in the telecommunications industry, believes the industry, the economy, and the public interest would be better served by a merger of Verizon Communications and MCI. Robert A. Saunders, the firm's research director, states, "Despite the increase in the share price offer to MCI shareholders, The Eastern Management Group continues to maintain that Verizon's size and industry position grant substantially more stability to stakeholders. Furthermore, we believe that capex trends and realizable commitments favor a Verizon-MCI merger rather than Qwest alternative." The Eastern Management Group recently completed a detailed study of MCI's potential acquisition and its impact on the telecommunications industry entitled "Critical Implications of the Proposed Qwest-MCI Merger: An Industry White Paper," also available on the company's Web site. This follow-on study goes into greater depth on the financials of Qwest's tertiary offer to MCI including analyses of opex and capex synergies, purchase obligations, and Qwest's long distance business and debt ratios. "Our research shows that management historically overestimates synergies, while underestimating integration costs when selling the acquisition to shareholders, regulators, and Wall Street. We have drawn the same conclusions in the Qwest-MCI estimates, which have been discounted by Wall Street," said Dr. Robinson. "We believe the new offer is a last ditch effort which is intended to sow further division between those shareholders who favor long-term goals and those who invested for quick profits." The Eastern Management Group is one of the oldest and largest management consulting firms focused exclusively on the communications industry. For more than a quarter century, The Eastern Management Group has served over 400 communications industry clients worldwide, including every major carrier, manufacturer and software company. The Eastern Management Group has offices in the U.S. and Japan. |
