Optical/IP Networks

Report: Verizon Close to MCI Deal

Verizon Communications Inc. (NYSE: VZ) is close to snatching MCI Inc. (Nasdaq: MCIP) from under the nose of rival RBOC Qwest Communications International Inc. (NYSE: Q), according to a report in the Wall Street Journal

Citing people close to the talks, the newspaper says a deal could be closed in the next few days and that details such as the final price and executive responsibilities are still being negotiated.

But the report adds that Qwest could still bump Verizon out of the picture with a higher bid. Qwest is believed to have made an initial offer of $6.3 billion last week, a price that the sources believe has been at least matched by Verizon (see Qwest Wants MCI, Says Report).

MCI's share price closed down 2 percent Thursday at $20.46, valuing the carrier at $6.5 billion. Verizon closed down just 2 cents at $36.04 (valuing the carrier at $99.8 billion), while Qwest closed down 12 cents, nearly 3 percent, at $4.16, valuing the smallest of the RBOCs at $7.55 billion.

If either Verizon or Qwest was successful in their attempts to swallow MCI, that would leave the unsuccessful party and BellSouth Corp. (NYSE: BLS) looking for a long-distance marriage partner, with Sprint Corp. (NYSE: FON), which has been expanding its wireless empire, the most attractive of the remaining targets (see Sprint, Nextel Confirm Merger and Takeover Talks Take Over).

SBC Communications Inc. (NYSE: SBC) has already made its move (see SBC to Buy AT&T for $16B and SBC/AT&T Shuffles Wireline Stats).

Talks between Verizon and MCI are not new, according to testimony given this week at the fraud trial of former WorldCom/MCI CEO Bernie "Ten Gallon" Ebbers (see Sullivan to Testify Against Ebbers, Report: Ebbers to Face Criminal Charges , and MCI to Ebbers: Timberrr!).

According to a Reuters report, the trial heard that a proposed 2001 merger between the two operators was abandoned because WorldCom was worried what Verizon would find hidden in WorldCom's accounts. Well, they got that one right! (See WorldCom Restatements Top $9B and WorldCom's Woes Mount).

Former WorldCom CFO Scott Sullivan, who has pleaded guilty to fraud and is testifying in the case, told the court on Thursday that he recommended to Ebbers that the CEO should abandon the merger talks because Verizon might uncover WorldCom's false accounting during a due diligence process.

Sullivan is set to continue giving evidence next Monday.

— Ray Le Maistre, International News Editor, Light Reading

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