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Verizon Threatens to Walk Away from MCI

Verizon Communications Inc. has threatened to walk away from plans to acquire MCI Inc. if the long-distance phone company declares a competing bid by Qwest Communications International Inc. to be superior.


Qwest has imposed a midnight deadline for MCI to accept its $9.07 billion offer, which exceeds a $7.64 billion bid by Verizon.


If the MCI board, capitulating to Qwest’s artificial deadline, declares this bid to be superior, it would seem to us that the decision-making process is being driven by the interests of short-term investors rather than the company’s long-term strength and viability, Verizon said in a statement Monday. Should this occur, we would no longer be interested in participating in such a process.


Verizon, the biggest U.S. phone company with annual revenue of $71.3 billion and a market value of $99 billion, has been occupied in a war of words with Denver-based Qwest over the right to acquire MCI.


In a letter submitted yesterday to MCI, Verizon Chairman and CEO Ivan Seidenberg trashed Qwest, the regional phone company in 14 states. Put simply, Verizon is seeking to acquire MCI to bolster its competitive position, not to raid its balance sheet and use it as a financial life boat as we believe is the case with Qwest, Seidenberg said.


MCI, whose sales have been shrinking, ended the year with $5.5 billion in cash, cash equivalents and marketable securities and debt of $5.9 billion. Qwest finished the year with $2 billion in cash and investments and debt of $17.3 billion.


Both companies posted a loss for the year, while Verizon reported 2004 earnings of $7.8 billion.



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