MCI Accepts Verizon Bid

MCI Inc. on Tuesday announced its board of directors has accepted a revised offer for the company from Verizon Communications Inc. in a bid valued at $7.64 billion, spurning an $8.45 billion offer from Qwest Communications International Inc.

Verizons revised proposal offers each MCI share cash and stock worth $23.50 and represents an increase of approximately $900 million.

We believe Verizons substantial increase in its offer, the strength of its competitive position and the financial certainty at close make this offer compelling to our shareholders, customers and employees, MCI Chairman Nicholas Katzenbach said in a statement.

In making its determination, MCI said it considered such factors as the increased need for scale and wireless capabilities, a strong capital structure, and continued confidence among its enterprise and government customers.

“We respect the right of Verizon to change the composition and value of their bid, but we still believe our proposal creates superior value for shareowners, Qwest said in a statement. We are going to assess the situation and determine what is in the best interests of shareowners, customers and employees.”

New York-based Verizon is the biggest U.S. phone company, with 57.3 million access lines, annual revenue of $71.3 billion and a market value of $98 billion.

Denver-based Qwest, the biggest local phone company in 14 states from Iowa to Washington, is much smaller than Verizon and has weaker financials. Qwest posted an annual net loss of $1.8 billion on revenue of $13.8 billion and is valued at $6.96 billion. The company ended the year with approximately 15.5 million access lines.

Qwest and Verizon have been vying for a company that is rapidly shrinking.

MCI has lost significant market share to Verizon and other competitors, and suffered a major regulatory setback that caused the Ashburn, Va., company to retreat from the residential phone market. MCI posted 2004 revenue of $20.7 billion, an annual decrease of 15 percent, and said it expected sales to decline by up to 14 percent in 2005.

Still, Verizon wants to own MCIs base of corporate and government customers in the wake of a planned $16 billion merger combining AT&T Corp. and SBC Communications Inc., the second-largest local phone company behind Verizon.

Telecommunications firms competing with SBC and Verizon have long complained the regional phone giants will not go head-to-head, but analysts say the planned megamergers could create a rivalry between the two companies for lucrative contracts with government agencies and big businesses.

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