Verizon To Acquire MCI For $6.7 Billion

An anonymous reader submits "Even after a last minute offer from Qwest Communications, MCI board members accepted a less lucrative offer from Verizon to be bought for $6.7 billion in cash, stock and dividends. The acquisition comes after Nextel Communications and Sprint Corp. partnered up in a $35 billion deal and SBC Communications Inc. and AT&T Corp. announced a $16 billion merger plan. So, what's next for the telecom industry?"

Comments

MCI...

[jxyama]

this is the same MCI that used to be "WorldCom" that went bust after accounting frauds, no?

i'm still pissed that corporate frauds go around, change their name, hide their past and go on business as usual...

Re:MCI...

[Quattro Vezina]

Actually, they've been MCI for a long time. They only merged with WorldCom in 1997. They were MCI before that, they were MCI WorldCom from 1997 to 2000, and after the fraud scandal, they became MCI again.

The only time they didn't have MCI in their name was between 2000 and the fraud scandal, which was a pretty short time. So, yeah, they're scum, but they're not really hiding. They're hiding a little, because the scandal is usually associated with WorldCom's name, but if they really wanted to hide their past, they'd come up with a completely new name.

Murders and Executions

[whackco]

I wonder who will benfit from this deal?

Somehow I doubt it will be the employee's...

[INSERT FUD]
The EMPLOYEES will collect the most benifits as in Unemployment...
on a less troll note, doesn't the FCC have to sanction these murders..ur... mergers? I wonder if they will allow all these to go through...

Re:Progress?

[MindStalker]

This happend during the previous administration too. Its really a funny situation where free markets would have worked, if it wasn't for the pesky problem of much of every teclos assests exist because of government grants.

Figures...

[hollismb]

The simple fact is, that long distance companies are a dying breed. Sure, plenty of people still have long distance, but more and more people are getting wise to the fact that you can simply use your cellphone to make a long distance call. Of course these companies are going to get bought out while they're still profitable. This coming off the heels of a year when wireless surpassed wireline in terms of customer base, and during a year when it's predicted the wireless minute usage will surpass wired minute useage.

No wires needed : Wireless power is possible too

[rolfpal]

See here
http://www.geocities.com/Area51/Shadowlands/9654/t esla/projecttesla.html

Nicola Tesla (the inventor of AC power) pioneered a wireless transmission method as well.

Cheers

wrong

[Indy1]

verizon is quite spammy as well, just not as bad as mci/worldfraud is

sbl listings for verizon

sbl listings for level 3, which verizon owns

AT&T

[mr_zorg]

And in other news, Sprint-Nextel, SBC-AT&T and MCI-Verizon signed a merger agreement today in a move to stave off competition and put an end the mega-mergers of late in the telecomm industry. The companies have issued a joint press-release indicating that the new company will be known as AT&T.

Hmm. Back to square one. Oh well.

differences in offers

[mckwant]

In buyouts like this, there are any number of things to consider:

- debt load
- payout schedule
- amount financed through new debt (junk bonds used to be a common component)
- ongoing ability of the buyer to actually pay

and so on. Have a look at the excellent "Barbarians at the Gate" (isbn: 0060536357) to get a feel for what happens. That was an extreme case (RJR/Nabisco), but it brings up a lot of the variables involved.

Re:Why?

[odin53]

Why would a board approve a purchase for less money than a competing offer?

Depends on several things. You're alluding to "Revlon duties", which are imposed by Delaware law and require the board of a company that's on the auction block to get the highest possible short-term shareholder value in the sale.

For one, it depends on the governing law and the structure of the deal. Revlon duties are part of Delaware corporate law; many states have "constituency" laws that affirmatively do not impose Revlon-type duties on the board (requiring a board to look at *non-shareholder* interests as well as shareholder interests in reviewing a merger deal).

Also, not all mergers will trigger Revlon duties; e.g., an all stock merger of equals between widely owned public companies would probably not trigger Revlon. With those kinds of mergers, boards are free to and should look at the long-term value (strategic or otherwise) of a merger, as well as its short-term impact. This could include the acquirer's growth prospects, stability, etc. (Dunno what the MCI/Qwest deal is; I know, RTFA...)

Also, if there are Revlon duties, shareholder value isn't *necessarily* all about the amount of money involved, though you have the right intuition that the amount of money is the dominant factor. It's pretty risky for board with Revlon duties to take a deal when there are competing higher dollar value offers, but other significant short-term factors could justify taking the smaller deal.

Re:Merger Madness

[M_Hulot]

It's called capitalism, and there's no time for that. This wave on consolidation has long been predicted, and its probably a good thing. In economics, as in most everything, we need to look at the evidence before having opinions. Time and time again economic studies show that mergers help neither the customers or the shareholders. http://www.globalchange.com/mergers.htm

Re:Merger Madness

[Anonymous Coward]

Lower costs or better services for their customers

Apparently, you don't understand capitalism as much as you claim to. The concept of the "invisible hand" rests upon the existence of open competition. As cartel members start acquiring one another, this open competition vanishes, and the result is a controlled market (That is to say, lower quality and higher prices to consumers).

But don't take my word for it, listen to the founder of American capitalism, Adam Smith

verizon does not own level 3

[Anonymous Coward]

Um, Verizon does *not* own Level 3 last I knew, and I just rechecked google to make sure that hadn't changed.

You don't know what you're talking about, moron.

[n6mod]

Damn near everywhere, there is a franchise granted by the city or county to a cable company. This is the one small way that government has the cable companies over a barrel. They've been able to force the operators to cover rural areas that way, and occasionally, when a municipality or county gets really irritated, they won't renew the franchise.

The "gentleman's agreements" you mention, which all of the MSOs will deny to avoid the Sherman act, mean that nobody else will bid for the franchise, so the city/county is hosed, and has to renew. It's really just a game of brinksmanship.

Now, the Viacom overbuild in Milwaukee is a mutation. There have been others. RCN overbuilds wherever they go. SBC (then Pacific Bell) tried it in San Jose because the incumbent MSO had totally ignored upgrades for years. They lost money on it and ended up selling it to the operator they were trying to displace.

I worked in cable for five years. I know whereof I speak.