- REUTERS
Verizon Communication's headquarters in New York, USA
WASHINGTON (Reuters):
Verizon Communications Inc. yesterday said it would buy long-distance telephone company MCI Communications Inc. in a deal worth $6.75 billion, giving Verizon a foothold in the market for serving large corporations.
The deal provides Verizon, the largest United States telecommunications company, the muscle to compete against SBC Communi-cations Inc. following its deal to acquire AT&T Corp. for $16 billion. It also spells the end of the independent long-distance telephone business in the U.S., with local telephone companies such as Verizon and SBC firmly in control of their one-time rivals.
Verizon's bid, which beat out a rival bid by Qwest Communications International Inc., includes an exchange of stock valued at $4.8 billion, based on Friday's closing prices, and $488 million in cash. MCI will also pay out dividends totaling nearly $1.5 billion, bringing the total value to $6.75 billion, or $20.75 a share.
Verizon Chairman Ivan Seidenberg said he and MCI chief executive Michael Capellas had been talking about a possible deal since late summer. He said the two companies matched up well, and that he did not expect any other bidders."There are an extraordinarily rich set of new opportunities going forward that I don't think other people can bring to the table," Seidenberg said.
END OF MCI
Shares of MCI, which have risen in recent weeks on word of its talks with Verizon and Qwest, fell 4.6 per cent to $19.80 in on Nasdaq, while Verizon's shares fell seven cents to $36.24 on the New York Stock Exchange. Qwest shares fell nearly four per cent to $3.99 on the NYSE.
The deal spells an end to MCI, formed as Microwave Communi-cations Inc. in the 1960s as one of the first modern competitors to AT&T in long-distance telephone services. MCI was acquired in 1998 by WorldCom, a Mississippi long-distance telephone reseller that bought about 60 companies in the 1990s.
WorldCom became a Wall Street darling with a stock market capitalisation of about $200 billion before buckling in 2002 in the largest U.S. bankruptcy, amid an $11 billion accounting scandal.
WorldCom emerged from bankruptcy last year and shed its troubled name for MCI. As part of the deal, Verizon can adjust its purchase price if MCI's remaining bankruptcy and tax liabilities grow beyond $1.7 billion.
The bids for MCI came in the wake of SBC's purchase of AT&T earlier this month and a wave of mergers among wireless telephone companies. SBC and Verizon had started competing for business communications and had won many small- and mid-sized customers. But large corporations rarely switch telecommunications companies, and AT&T and MCI had held on to their clients even as their other businesses faltered.
To maintain those clients, AT&T and MCI have been forced to slash prices. MCI on Monday said its fourth-quarter revenues fell 10 per cent, with revenue from large customers falling three per cent from a year earlier.
