Unlike the readers of Network World, Gordon Gekko never held responsibility for providing telecom services to thousands of employees scattered across the globe. So the proudly amoral movie character played by Michael Douglas in “Wall Street” was free to utter his most famous line – “Greed is good. It has marked the upward surge of man.” – without losing any sleep over the ramifications of conducting mergers and acquisitions business absent any consideration other than the bottom line.
Network executives do not enjoy such a luxury.
Which brings us to the interminable tug-of-war between Verizon and Qwest over who gets MCI.
The MCI board of directors last week again did themselves proud – for the most part – by spurning Qwest’s latest offer in favor of continued allegiance to a less lucrative but strategically superior deal inked in February with Verizon. MCI did so even though Qwest’s offer is almost 20% higher, a sizable carrot that has the real Gekkos on the real Wall Street clamoring for MCI to take the money and run.
And the bottom-liners may yet get their way, which is reason enough for MCI customers to be worried and to keep their communications channels with MCI executives open and active. It’s been reported that more than a quarter of MCI stockholders consider the Verizon offer lacking, and that has heightened speculation that the disaffected stockholders and/or Qwest will soon tap-dance around the MCI board in favor of pushing a proxy vote.
The Associated Press quoted Bill Miller, chief investment officer for Legg Mason Capital Management, as describing MCI’s board as “clearly mathematically challenged,” adding, “I have not spoken to nor have seen in print one MCI shareholder who prefers the Verizon offer.”
It should come as no surprise that Legg Mason holds a significant slug of MCI stock, 1.7%. Taken alone that stake doesn’t mean Miller is wrong, of course, but it does mean we can presume that the interests of MCI customers are not foremost in his calculations.
Stockholder sentiments aside, if there are significant numbers of MCI customers who would prefer to see their carrier cast its lot with Qwest they have remained remarkably quiet. The same holds for telecom industry pundits. In fact, MCI officials have made a point of hanging much of their rejection of Qwest’s bid on their contention that customer feedback is overwhelmingly leading them in the direction of Verizon. That’s not difficult to believe given the relative strengths and weaknesses of Qwest and Verizon. (Now Verizon customers rightfully might wonder if their carrier is up to the task of digesting MCI without belching up a boatload of service problems, but that’s another matter altogether.)
And so as not to get too warm and fuzzy about the intentions of the MCI board, it is worth noting the press reports that had MCI urging Qwest to nudge its $27.90 per share offer up to a nice, round $30. If true, there’s little to gather from that nugget other than the conclusion that there’s a limit to the regard in which the MCI board holds its customers. . . . Can you see Gekko smiling?
None of this is intended to blame Qwest CEO Richard Notebaert for struggling mightily to grab onto any life preserver within his reach. His case might not make sense from the perspective of prospective Qwest/MCI enterprise customers, but the guy in the corner office has a fiduciary responsibility that doesn’t always square with the best interests of all constituencies.
But Gekko also said in that movie: “I always bet on sure things.”
You can bet the kids’ college money on this much: If MCI shareholders do manage to drag the company into Qwest’s waiting arms, it will be MCI customers who pay the long-term price.
Care to share a thought about the deal . . . or greed? The address is buzz@nww.com.
