Qwest, Verizon drag MCI battle through the press

Qwest and Verizon are taking their tug of war for MCI to the media.

Qwest CEO Richard Notebaert had an editorial published in today's Wall Street Journal stating that a union on the scale of Verizon/MCI or SBC/AT&T would amount to a "megamerger" that provides "less choice, less competition" and "massively increased pricing power."

"Such concentration does not rationalize and improve the market, it just ossifies it -- to the disadvantage of all," Notebaert states in his editorial.

Verizon countered with a press release condemning a possible Qwest/MCI marriage as one that could "harm national security-related customers and the long-term interests of large businesses, government agencies, consumers and shareholders."

Cash-strapped Qwest, swimming in $17 billion in debt, could "close MCI's Internet backbone and long-distance network, something that would result in less competition, more concentration and fewer choices," states Verizon Executive Vice President Tom Tauke in the release.

"A Qwest-MCI combination is not in the public interest," Tauke states.

MCI accepted Verizon's $6.7 billion offer on Feb. 14. Qwest claims it offered MCI $8 billion but that its offer was never acknowledged or considered by MCI. Qwest has since modified but not raised its bid to make it more appealing to MCI shareholders.

Qwest believes a combination between itself and MCI would produce a "strong, but not dominant" provider able to compete effectively nationwide with the combined SBC/AT&T and Verizon, "which even today is a behemoth," according to the Notebaert editorial.

"The outcome of these battles concerns more than just corporate power and bottom lines," he states. "Ultimately, the test is whether we create a marketplace that provides affordable, innovative communications services that empower residential and small-business consumers in the Digital Age. The megamergers do not pass that test."

Verizon's Tauke said Qwest has not made the commitment to invest in MCI's assets the way Verizon has. Verizon says it will pour about $3 billion into MCI's backbone while Qwest is too weakened financially to do so.

An inability to invest in the MCI infrastructure could weaken national security, Tauke claims, because MCI's backbone is part of the U.S. Department of Homeland Security network.

"We don't believe any of this can be good for consumers or MCI's government or national security-related customers," he said.

This story, "Qwest, Verizon drag MCI battle through the press" was originally published by The Edge.


Copyright © 2005 IDG Communications, Inc.

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