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Last Updated: Monday, 25 April, 2005, 10:31 GMT 11:31 UK
MCI warms to Qwest in bid battle
Qwest offices tower over those of the bigger firm MCI in the US city of Denver
Qwest's chances of buying MCI are looking up for the first time
US phone firm MCI has notched up the tension between its suitors, saying Qwest's latest merger offer was "superior" to Verizon's agreed bid.

Previously, MCI's board had stuck to backing Verizon's lower-priced bid, seeing greater security in a merger with the larger of the rival bidders.

MCI's change of heart came after Qwest raised its bid for the third time, to $9.75bn (5.11bn).

MCI's board has now given Verizon five working days to raise its $7.5bn offer.

That breathing space runs out when US stock markets close on Friday 29 April.

'Gratified'

As yet, the MCI board has not shifted its formal stance of recommending Verizon's offer to shareholders.

Verizon head offices in Manhattan, New York
Front runner Verizon may be falling behind

However, its statement appears to make a shift inevitable unless Verizon matches the latest Qwest bid, which is pitched 30% higher than Verizon's.

Qwest said it was "gratified" by MCI's change of heart. Under the terms of its raised offer, MCI's board has until 3 May to switch its recommendation.

Qwest added that it now wants MCI "to build on its statement of superiority with specific acts of support", such as seeking regulatory approval for their merger to go ahead.

Break-up fee

Verizon, meanwhile, made clear that any move to abandon their merger could prove costly for MCI.

Verizon said it would be entitled to a $240m break-up fee, and $10m in expenses, and could insist on MCI shareholders meeting to vote on its bid.

Verizon reiterated its belief that its offer for MCI "creates long-term, as well as short-term value, for the shareholders of both companies by protecting the integrity of MCI's businesses".

MCI is the second-biggest player in the US long distance telecoms market, having emerged from the ruins of bankrupt telecoms operator Worldcom last year.

Amid a spate of US telecoms mergers, local call service providers Qwest and Verizon are both keen to win control of MCI which - until now - has seen a link with market-leader Verizon as a better bet than fourth-ranked Qwest.

The latest proposal from Qwest is worth $30.40 per share, adding $2.50 in cash per share to its previous offer.

Verizon's bid was worth $23.10 a share. However, it has since offered to pay MCI's biggest shareholder, the Mexican tycoon Carlos Slim Helu $25.72 a share, angering other MCI shareholders and creating pressure for an improved overall bid, the Wall Street Journal reported.





SEE ALSO:
Qwest raises its offer for MCI
22 Apr 05 |  Business
MCI rejects $9.1bn bid from Qwest
06 Apr 05 |  Business
Verizon threatens to end MCI deal
04 Apr 05 |  Business
MCI reopens bid talks with Qwest
01 Apr 05 |  Business
MCI accepts larger Verizon offer
29 Mar 05 |  Business
Qwest raises MCI offer to $8.45bn
17 Mar 05 |  Business


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