Advertisement
Share

Qwest Signals Resolve on MCI

From Associated Press

Qwest Communications International Inc. has hired a proxy consulting firm -- a clear sign it may ask MCI Inc. shareholders to vote on Qwest’s $8.45-billion offer as an alternative to MCI’s merger agreement with Verizon Communications Inc.

Altman Group President Ken Altman said Wednesday that his firm was hired to augment investor relations for Qwest. He declined to discuss details of the tasks his firm is handling for Qwest.

Investors responded favorably again to the prospect of Qwest persisting with its bid, pushing MCI’s shares further above the $7.64-billion price tag Verizon agreed to pay Tuesday.

MCI shares rose 67 cents to $24.45 on Nasdaq. Qwest shares fell 2 cents to $3.77 on the New York Stock Exchange. Verizon shares rose 57 cents to $35.43, also on the NYSE.

Advertisement

Denver-based Qwest, with local phone service in 14 Western states and a nationwide fiber-optic network, may still submit a sweetened offer to MCI’s board or possibly try a hostile takeover, several analysts said.

Qwest has declined comment on its plans, but Chief Financial Officer Oren Shaffer provided some hints of what’s to come on. Speaking at an investors conference Tuesday, Shaffer said Qwest would consult with MCI stockholders.

“Right now, we think that the shareholders’ interests and our interests are aligned,” he said.

MCI’s board has been concerned about partnering with Qwest, which is financially weaker than Verizon, the dominant local phone company in the Northeast and the mid-Atlantic region as well as a top player in the cellphone industry.

Qwest is weighed down by $17 billion in debt, lacks a wireless division and faces growing competition from cable and high-speed data companies.

Still, analysts believe that Qwest will press its bid for MCI.

“We do not expect that Qwest will completely abandon its pursuit of MCI and is likely to revise -- increase -- its offer and officially launch a hostile offer for MCI,” Lehman Bros. analysts Andrew Whittaker and Blake Bath wrote in a research note.

Analyst Donna Jaegers of Janco Partners Inc. said the process had been time-consuming for Qwest executives who should be focused on operations.

Advertisement

“I’m hoping Qwest gets the message and doesn’t up its bid any further,” she said.

Qwest sees an MCI acquisition as a way to boost its bottom line. Analysts have said the combined companies would increase Qwest’s free cash flow, allowing it to pay down some of its debt.


Advertisement