MCI Inc. (MCIP) shareholder Deephaven Capital Management (search) said Wednesday it would fight Verizon Communications Inc.'s (VZ) proposed $8.6 billion acquisition of the long-distance carrier.

Deephaven, a fund manager that holds a 4.96 percent stake in MCI, said in a proxy statement filed with the Securities and Exchange Commission (search) that it would solicit other MCI shareholders to vote against the Verizon merger, saying a deal with Qwest Communications International Inc. (Q) would be better for MCI shareholders.

Qwest in May hadions company, after MCI rejected its $9.8 billion cash and stock offer in favor of Verizon's bid. In addition to its MCI shares, Deephaven has a short position on 4.3 million Verizon shares and owns 800,100 shares of Qwest.

"We believe that the synergies that would be created with the combination of MCI and Qwest would deliver substantially more shareholder value than the MCI-Verizon merger," Matthew Halbower, portfolio manager for Deephaven, told Reuters.

In its filing, Deephaven, a subsidiary of Knight Trading Group Inc. (NITE), said it does not know if Qwest would resume its attempt to buy MCI should Verizon's proposal be rejected by shareholders.

Several large shareholders have previously opposed the MCI-Verizon deal in favor of Qwest's offer, but said that without a Qwest bid on the table they would have to support the Verizon bid. Qwest withdrew its offer after saying the bidding process for MCI had been skewed against it.

Verizon and MCI have not set a date for a meeting to vote on Verizon's offer, but Deephaven said it will use the proxies it receives whenever that meeting is held.

Verizon and MCI representatives could not be immediately reached for comment. MCI shares rose 11 cents to $25.60 in morning trading on Nasdaq, while Qwest shares were flat and Verizon's shares fell 10 cents to $34.91 on the New York Stock Exchange.