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Qwest Ain't Too Proud to BegQwest Ain't Too Proud to Beg

Qwest says MCI has gone 'dark' on its increased offer. Verizon derides Qwest's bid as work of 'modern fiction'

March 22, 2005

3 Min Read
Qwest Ain't Too Proud to Beg

Qwest Communications International Inc. (NYSE: Q) CEO Richard Notebaert has written another letter to the board of MCI Inc. (Nasdaq: MCIP), pleading with the long-distance carrier's management to reengage in talks concerning Qwest's latest and improved acquisition offer (see Qwest Ups MCI Bid to $8.45B).

Qwest is scrapping with rival RBOC Verizon Communications Inc. (NYSE: VZ) to buy MCI, and has been increasing its bid value in an effort to wrest MCI away from Verizon's clutches (see Battle for MCI Heats Up and Verizon Wins Tussle for MCI).

And Notebaert is clearly agitated. He's peeved because MCI is shying away from talks with Qwest, even though MCI has said it will consider Qwest's latest offer (see MCI to Review Qwest Offer).

In his latest letter to MCI chairman Nicholas Katzenbach filed with the Securities and Exchange Commission (SEC), Notebaert writes: "Your advisors tell us that MCI has gone 'dark' and refuses to continue to speak with Qwest about our proposal made to the MCI Board on March 16 and made public on March 17. When granting Mr. Capellas's request that the MCI Board be permitted until March 28th to respond to our proposal, we did not think that MCI would refuse to talk with Qwest during the interim."

It's always dangerous to assume, isn't it?

Notebaert continues: "The straw man being propped up to explain why MCI won't continue what has been a fruitful exchange of information with Qwest is that MCI's merger agreement with Verizon prohibits any discussions with Qwest." But, he claims, "If the MCI Board of Directors truly wishes to evaluate Qwest's proposal, there is no legally valid excuse not to continue the exchange of information."

He adds: "Verizon, who has released no details of the underlying benefits of its offer, continues in its shrill attempt to change the focus away from delivering maximum value to MCI shareholders, but ignores the one overriding issue: Qwest's offer is over 25% higher than Verizon's offer."

MCI, meanwhile, is playing it cool and not commenting.

Not so with Verizon, however, as its CEO, Ivan Seidenberg, has also been writing to the MCI chairman, and he's not pulling any punches:

"We observed in our letter to you dated March 16, 2005, that mergers in the long-distance segment of the telecom industry predicated upon the promise of huge synergies have resulted in spectacular failures and cited in particular as an example Qwest’s acquisition of US WEST in June 2000.

While we certainly sympathize with Qwest management’s plight and understand their desperation given Qwest’s circumstances, we nevertheless feel compelled to again express our view that its proposal is profoundly flawed and its claims unsupportable."


But that's not all. Seidenberg goes on to trash Qwest's "various extravagant claims" about how its deal offers greater synergies and cost efficiencies. "We have analyzed Qwest’s synergy claims and believe the presentation might be more appropriately considered in the category of Modern Fiction."

Seidenberg closes his letter by praising MCI, and saying that Verizon "will not be distracted by Qwest’s histrionics, false statements and grossly exaggerated synergy claims."

MCI's share price was up 4 cents to $23.34 this morning in pre-market trading. That's below Qwest's $26 per share bid, and above Verizon's $20.75 per share offer.

Qwest's share price closed Monday at $3.85, while Verizon's stock ended yesterday at $34.95.

— Ray Le Maistre, International News Editor, Light Reading

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