Qwest ups the ante in battle for MCI

Qwest Communications International yesterday raised its takeover offer for McI to about US$7.3 billion ($10.2 billion) in cash and stock, sources say, while rival bidder Verizon Communications responded by altering its lower offer.

Qwest's new offer, which values MCI at US$23 a share, topped its original offer of US$6.3 billion, said the sources, who asked not to be named.

Verizon initially offered a similar price for MCI, but tweaked its offer over the weekend, the sources said. Terms of the new offer were not immediately available.

MCI, whose market capitalisation stood at US$6.6 billion on Friday, could not immediately be reached for comment. Qwest declined to comment, and Verizon also could not be reached for comment.

MCI has been looking for a buyer for months, but interest in the company spiked after long-distance rival AT&T agreed in January to be bought by SBC Communications for US$16 billion, the sources said.

While MCI's revenue has been shrinking and the long-distance telephone market has suffered from increased competition, industry analysts say the company's high-speed data network, lucrative list of corporate customers and skilled sales and marketing team still make it an attractive buyout target for a Baby Bell.

Talks between MCI and its suitors remained fluid yesterday and no decision had been made, the sources said.

Under the proposal with Qwest, it is expected that MCI chief executive Michael Capellas would leave the firm.

Qwest chairman Richard Notebaert would probably head the merged company, said the sources.

Capellas has been cited by Wall St analysts as a logical candidate to head Hewlett-Packard following last week's ouster of the computer-maker's chairman and chief executive, Carly Fiorina.

Qwest, the dominant local phone company in 14 states from Minnesota to Washington, sees MCI's US$5 billion in cash and steady cashflow as a way to help it manage its US$17 billion in debt.

Shares of MCI closed up 1.42 per cent at US$20.75 in Nasdaq trading on Friday.

On the New York Stock Exchange, Verizon shares gained 0.75 per cent to close at US$36.31 and Quest dipped 1c to close at US$4.15.

- REUTERS