Is It Time For Tech Titans To Hang Up on MCI
Monday, April 25, 2005SUSIE GHARIB: No word tonight from Verizon on whether it will make a sweetened bid to buy MCI. Over the weekend, MCI said Qwest`s new offer of $30 a share was superior to the deal it already had with Verizon. Verizon now has until Friday to raise its offer or give up. This buyout battle has been going on now for 11 weeks, and as Stephanie Woods reports, some industry observers say they don`t know why anyone wants to buy MCI in the first place.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: MCI`s core long distance business is in decline. Revenues fell 15 percent last year. And without a buyout, MCI expects revenues to drop at least another 10 percent this year.
SCOTT CLELAND, CEO, PRECURSOR: How ironic and how weird is that, that a property that is a seriously depreciating asset, without much business future of its own, is being fought over so fiercely by Qwest and Verizon.
WOODS: Still, MCI has desirable assets. It has the most connected web network. It also has "Fortune" 100 companies and the Federal government as customers. A key for both Qwest and Verizon is to secure that customer base.
PAUL GLENCHUR, STANFORD WASHINGTON RESEARCH GROUP: I think it`s important that, for example, cable doesn`t play in the enterprise space and that they can nurture those customer relationships and migrate them to new services.
WOODS: For Verizon the call to buy MCI is driven by competition with SBC. SBC is buying AT&T, so a Verizon purchase of MCI would keep the two on more or less equal footing.
GEORGE DELLINGER, WASHINGTON ANALYSIS: The minute that SBC went after AT&T, it`s like a checkerboard, that all of a sudden, a spot has been taken and you`ve sort of backed yourself into the few remaining options and one of the few remaining options was to take MCI.
WOODS: For Qwest, an MCI hookup would boost its balance sheet. Qwest said today it will post a profit in the first quarter even though its revenues are flat.
GLENCHUR: Strategically, it is important to get the enterprise customer base. They feel that`s important, but from just a financial perspective, they have $17 billion in debt. MCI pushed most of its debt off in bankruptcy proceedings and so actually strengthens the balance sheet of Qwest.
WOODS: But some analysts are skeptical MCI`s business customers are worth the fight, since more of them may choose to set up their own networks in house.
CLELAND: The technology today of Internet protocol is so much cheaper and so much easier to use that you really don`t need outsourced companies like AT&T or MCI as much going forward as you did in the past.
WOODS: But others see opportunity there for whoever wins MCI.
DELLINGER: I really don`t think "Fortune" 100 companies want to go change their central nervous system just to save a penny here and there. The first issues are reliability and product quality and I think that`s what the bells will deliver longer term.
WOODS: Many observers expect Verizon to up its bid by the end of the week to win MCI, but that may not be the end of it. If Qwest wants to keep fighting, the battle could go on into the summer. Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.
