Qwest Communications International Inc. (Q) on Thursday offered $8.45 billion to acquire MCI Inc. (MCIP), adding nearly a half-billion dollars to its bid to break up the long-distance phone company's planned merger with Verizon Communications Inc. (VZ).

The sweetened offer, worth about $1.8 billion more than the current value of MCI's agreement with Verizon, was presented to MCI's board on Wednesday in a meeting that stretched into the night.

MCI, which changed its name from WorldCom a year ago, said Thursday its board will respond to Qwest's new offer by close of business on March 28.

MCI shares fell 29 cents to $23.46 on the Nasdaq Stock Market (search). Qwest shares slipped 7 cents to $3.75, while Verizon shares lost 15 cents to $35.19 on the New York Stock Exchange (search).

Qwest's offer reaffirmed forecasts that its deal could produce twice as much cost savings as Verizon's. Qwest also said MCI's lawyers apparently agreed during talks over the past two weeks that a Qwest deal would gain government approvals quicker than a Verizon merger, which Qwest says would hurt market competition.

Verizon has asserted just the opposite, and on Thursday reiterated its contention that Qwest and its offer were financially unsound. The company declined to say whether it might consider paying more in light of the new Qwest offer.

Qwest, in a letter to MCI's board, said "MCI's legal counsel has acknowledged that the Qwest/MCI transaction could close more quickly than a Verizon/MCI transaction, although they did not agree with us as to how much more quickly."

Qwest's original proposal of $8 billion was turned down by MCI in favor of Verizon's bid out of concerns about Qwest's weak financial health and questionable business prospects.

But criticism from some MCI shareholders, particularly hedge funds and other short-term investors wanting the highest possible payoff, prompted the company to agree to reconsider the Qwest's overtures.

The revised bid values MCI's stock at $26 per share, consisting of $10.50 in cash and $15.50 in Qwest stock. Overall, that amounts to about $3.41 billion in cash and $5.04 billion worth of Qwest stock.

Those terms represent an increase of $1.40 in the cash component of the offer compared with the proposal Qwest submitted in late February, which valued MCI at $24.60 per share or $8 billion overall.

The merger agreement reached with Verizon in mid-February currently values MCI at $20.45 per share, or about $6.65 billion. That includes $2 billion in cash, or $6 per MCI share.

The latest Qwest bid also retains a "collar" guarantee on the value of its stock, which would increase the amount of Qwest shares paid if they fall in value by the time the proposed deal closes.

The Verizon-MCI deal calls for MCI's board to make a determination whether any rival bid is "superior." If the deliberations lead to that conclusion, Verizon would have five days to respond with a counteroffer.

Should MCI's board either reject the new Qwest proposal or agree to an improved Verizon offer, Qwest could still try to take its bid directly to shareholders. That potential proxy fight would likely be resolved in May at the MCI shareholder meeting called to vote on the Verizon deal.

Verizon said the new Qwest offer only raises more concerns about the financial viability of a combined Qwest-MCI company.

"Qwest's most recent bid does nothing to address the fundamental concerns we have identified, while increasing the amount of cash to be paid out to shareholders exacerbates the risks," Verizon spokesman Eric Rabe said.

On Wednesday, Verizon sent a sharply worded letter to MCI questioning Qwest's predictions of huge savings and future growth from a potential Qwest-MCI combination, citing Qwest's declining business and large debt load.

"No wonder there appears to be a desperate quality to Qwest's efforts to acquire MCI," Verizon Chief Executive Ivan Seidenberg said in the letter. "Qwest fails to explain the financial alchemy required to keep Qwest afloat, complete the acquisition of MCI, and invest in the business."