Verizon Communications Inc. and MCI Inc. today closed on their $8.5 billion merger, which was announced in mid-2005 after a bitter battle between Verizon and Qwest Communications International Inc. for the long-distance carrier.
Under terms of the merger agreement, MCI shareholders will receive 0.5743 shares of Verizon and cash for each of their MCI shares. Verizon decided to make a supplemental cash payment of $2.738 per MCI share, or a total of $779 million, rather than issue additional shares of Verizon, so that the merger consideration was equal to at least $20.40 per share of MCI. Effective today, trading in MCIs common stock has been stopped.
“This milestone for Verizon creates a new competitive force with the power of the global MCI network and the reach of Verizons broadband and wireless networks in the U.S.,” said Ivan Seidenberg, Verizons chairman and CEO, in a news release. “Our strategy is to be a customer-focused leader in consumer broadband and video, as well as business and government services, in both the landline and wireless environments.
MCI brings a pervasive IP backbone to Verizon; Verizon is busy rolling out Internet-based services such as FiOS TV.
Verizon will remain based in New York and has folded the former MCI into its new Verizon Business division. That unit includes the former MCIs business and government customers, as well as Verizon divisions including the former Verizon Enterprise Solutions Group, which was part of Domestic Telecom.
Verizon now operates three network-based businesses: Verizon Business; Verizon Wireless; and the companys landline segment. Verizon Business serves medium and large businesses and government customers, and will announce details of new products and services later this month. John Killian has been named president of Verizon Business; he previously served as senior vice president and CFO of Verizon Domestic Telecom.
Verizons executive management team and board of directors remain unchanged. Michael Capellas, former president and CEO of MCI, has announced he is leaving the business now that the merger has been completed.
The Baby Bells have won the long-distance battle, but now they are gearing up for an even bigger threat, noted Jeff Kagan, a telecom industry analyst. The Internet is allowing new competitors to offer VoIP service to compete with their telephone services. The economics of the telecom industry in the United States is changing dramatically.
Verizon Communications Inc. www.verizon.com