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Report: Verizon Also Pursuing MCI Deal

Associated Press
Published | Updated

NEW YORK – Telecom giant Verizon Communications Inc. (VZ) has reportedly floated an informal buyout offer for MCI Corp. (MCI) , the long distance telephone company that has been awash in takeover speculation in the wake of regional phone company SBC Communications Inc.'s (SBC) $16 billion deal for AT&T Corp.(T).

The Wall Street Journal (search) reported Thursday that talks have accelerated between Verizon and MCI and that Verizon has floated an informal acquisition offer of cash and stock priced near the $6.3 billion that Qwest Communications International Inc. (Q) has reportedly suggested in separate talks with MCI. It cited unidentified sources for the report.

New York-based Verizon has its roots providing local telephone service mainly in the Northeast and Mid-Atlantic states. Qwest, based in Denver, provides local phone service to about 14 mostly western states.

None of the companies have commented on the reported discussions.

The Journal said the talks between Verizon and MCI are continuing and fluid and could fall apart. But it said the discussions have become "meaningful" in recent days although no formal offer has been made.

MCI, based in Ashburn, Va., could give Verizon an impressive roster of business customers as well as a global network for sending phone calls and data.

The Journal said talks between MCI and Qwest have cooled in recent days, and some analysts say that MCI probably would prefer to make a deal with the larger and financially stronger Verizon.

The telecom industry is consolidating amid intense price competition. In addition to SBC's deal last month for AT&T Corp., long-distance and wireless provider Sprint Corp. agreed in December to buy Nextel Communications Inc.

MCI and Qwest are each still recovering from financial scandals which have hobbled their businesses.

MCI emerged from bankruptcy last spring, its balance sheet cleaned of debt and its name changed from WorldCom. Qwest lost $1.66 billion in the first nine months of 2004, including a $250 million fine to settle a civil fraud case brought by the federal government.

Shares of MCI fell 16 cents to $20.70 on the Nasdaq Stock Market (search). Verizon shares rose 22 cents to $36.28 on the New York Stock Exchange (search), where Qwest shares lost 17 cents, or 4 percent, to $4.11.