In a deal valued as much as $6.8 billion in cash, shares and dividends to be paid to MCI shareholders, the merger will give Verizon a global phone and data network and access to a large cadre of enterprise clients, according to The Wall Street Journal. Boards of directors of both companies announced the merger Monday.
The merger is a drastic reversal for Verizon, which had earlier dismissed speculation that it would respond to recent multi-billion dollar agreements by AT&T Corp. and Sprint Corp. Industry rivals AT&T and SBC Communications Inc. announced a $16 billion buyout two weeks ago, and in December, Sprint Corp. and Nextel Inc. announced plans to merge.
These recent mergers would shrink the U.S. telecommunications industry to just five major service providers: Verizon, SBC, BellSouth Corp., Sprint and Qwest.
The Verizon-MCI deal is expected to take a year to be approved by MCI shareholders and industry regulators, but the deal's announcement has already caused some stock market fluctuations. Verizon shares rose 32 cents to $36.63 on the New York Stock Exchange in early trading Monday, while MCI shares fell $1.15 to $19.60 on the Nasdaq Stock Market.
"With our heritage of innovation, global network and world-class Enterprise capabilities, MCI is the right partner for Verizon," said MCI president and CEO Michael Capellas, the Associated Press reported.
In the deal, MCI will pair its extensive national customer base and sales network to Verizon's phone, cable and interactive services, expected to get a further boost with Verizon's billion-dollar investment for upgrades.
"This is the right deal at the right time," said Verizon Chairman and CEO Ivan Seidenberg. "It is a natural and logical extension of Verizon's strategy to transform our company to serve growth markets and offer broadband technologies."