Slashdot Mirror
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?"
Sprint to aquire Nextel, SBC to Aquire AT&T, Verizon to aquire MCI.
Take a freakin' breather already. All in the name of screwing the consumer over, I'd bet.
More
and in the darkness connect them
In Canada we had the following:
Telus purchased Clearnet
Rogers & Shaw swap regions so they each have cable monopoly in their region.
Rogers purchased Fido
Interesting.
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.
I support the Center for Consumer Freedom
The hot new board game from Parker Brothers hits the shelves: Telecom MONOPOLY
(It's never too late to join the Renaissance)
* SBC owns AT&T
* Verizon owns MCI
After the baby bells were broken up, we had this very nice period where briefly, though you may not have had a choice of local phone providers, you had a real and serious choice of long-distance phone providers. Anyone else suspect this era is about to end? I think we're about to quickly go to the point where your regional local-phone monopoly quickly becomes a regional long-distance phone monopoly.
Who wants to take bets on how many SBC customers will be using MCI in five years, or how many Verizon customers will be using AT&T?
From what I've seen out of qwest here in the west, verizon is a better company. Lesser of two evils I suppose.
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.
After two more rounds of mergers, we'll have two companies left in each area. Each with strict but unwritten agreements not to compete in each others' areas. It's the same way Comcast/Time Warner do business in the Cable TV industry right now, anyways.
...that eventually, all of the US telecom companies will merge back into one. That single, surviving company will be known as "The Bell System" or, colloquially as "Ma Bell".
You heard it here first.
--
Verizon is what used to be GTE and Bell Atlantic. With MCI in the fold, does this allow them to be a national phone company that can be a local carrier coast to coast, like Bell used to be in the 70's? I am suspecting not, but it's worth asking.
I know MCI is not a local phone company (at least they weren't when I had them as my long distance carrier), but that would make Verizon huge (even more so than they are now).
A love beyond compare...
What's next?!? The same thing we do every night, Pinky. try to Take OVer THE WORLD!
These opponents play to people's sense of outrage at the corporate scandals that rocked the business world last year, as well as to the breathtaking extent of the $11 billion accounting fraud at WorldCom. Their main claim is that allowing MCI to exit bankruptcy would allow it to profit from its "ill-gotten gains." Both justice and deterrence, they argue, require that MCI be dismembered, if not put to death.
Such claims understandably strike an emotional chord with America's scandal-weary public. Yet those claims are wrong all the same. Simply put, MCI retains no "ill-gotten gains" from the accounting fraud. Whatever short-term advantage the company might have gained has already been lost, many times over. In his opinion on the recent litigation between the SEC and MCI, Federal district court judge Jed Rakoff placed the liquidation value of the company at less than $6 billion. This value pales in comparison with the $200 billion by which WorldCom's equity has plunged.
In the overall scheme of things, there can be little doubt but that MCI would be in stronger shape today had the fraud never occurred, than it will be if it is allowed to emerge from bankruptcy.
While MCI's liquidation would be good for its rivals, it would be bad for the consuming public. It would reduce the choices available to many consumers of telecom services, force 20 million MCI customers to find new suppliers, and leave more of the telecom market under the control of the still relatively monopolistic Baby Bell companies. Local phone competition, which has finally started to deliver major savings to consumers in recent years, would take an especially big hit. Also wrong are claims that the liquidation of MCI is a means to secure justice and promote deterrence against such misdeeds in the future. Justice is served by punishing responsible individuals. So is deterrence. Neither is served by wreaking punishment indiscriminately on such innocent people as workers, investors, creditors, and customers.
To penalize an entire corporation for the misdeeds of some of its officials is to spread the resulting loss among all participants in the corporation. If corporate misdeeds are punished at the individual level, deterrence works as it is supposed to work. But if those misdeeds are punished at the corporate level, the deterrence effect is weakened and the injustice compounded.
It would be different if all participants within WorldCom had agreed to engage in fraudulent practice. But this is clearly not what happened. A few crooked executives engaged in fraudulent activity, and the practice was halted and made public when other individuals within the company became aware of it. To punish MCI wholesale would be to punish those innocent individuals and not the guilty wrongdoers.
It is easy to see why the entrenched incumbents are so keen to bring about MCI's demise. The likes of AT&T and the Baby Bells would rather feed on WorldCom's carcass than see it rejuvenated and have to compete with it for business. The public good, however, would be far better served if MCI receives a second chance instead of an early grave
and the same MCI that is the number 1 spammer according to the Spamhaus charts. Spamhaus also put out this article charging that MCI profits from spam. Verizon's getting all that.
"Ancillary does not mean you get to rule the world." --U.S. Circuit Judge Harry Edwards, speaking to the FCC's lawyer
Don't wanna use no MCI!
Reach out and touch some other fool,
'Cause breakin' up is hard on you!
They say that breakin' up was hard to do,
When Carly put the screws to you,
Spun off Lucent and then,
Includin' breakin' up she also buggered HPQ and then...
AT&T gave back the phone!
And now we'll lease, no more to own,
Reach out and touch some other fool,
'Cause breakin' up was hard on you.
(With apologies to the original 1984 Breakin' up is hard on you parody from the American Comedy Network.)
MCI is currently the largest ISP allowing (and some consider supporting) spammers to use their bandwidth. Verizon is currently one of the most aggressive anti-spam ISPs. Some have argued they've gone to far blocking legit messages often but most of their users are happy about the spam control. How these two will mesh may be a very interesting chapter in the war on Spam.
If that happens, the telcos will have screwed themselves.
Why bother with a high-price telco with crappy services when you can get Vonage or Skype or any number of IP-based carriers that will be able to provide the same service cheaper and faster than traditional telcos.
You tend to see consolidation in dying industries - POTS is becoming a dying industry. Once VOIP starts really hitting the mainstream, that line of revenue will only continue to dry up.
Right now the money is in cellular service (where there's usually at least one local/regional company competing with the big boys - or at least there has been in my experience), and in VOIP. Either the telcos adapt or die.
As we've learned from both the dinosaurs and AOL/TimeWarner, sometimes being big and complex isn't a good thing from an evolutionary standpoint.
The three were about to merge, but their plans were thwarted when it was discovered that the world's supply of stupid committee-selected synthetic corporate names has finally been exhausted, so there would be no way to refer to the new conglomerate.
How about we give the spammers the boot?
Eternity: will that be smoking, or non-smoking? I Corinthians 6:9-10
Well, now that a few of them have merged, they'll probably stabilize for a little while, and then start buying each other up again. Pretty soon, we'll be down to one company providing phone service.
Hey, wasn't there talk of TV over phone too? Maybe once all the companies merge, they could call themselves... American Telephone and Television? Or just AT&T for short. That has a nice ring to it. Ring! That's it, they can use a bell as their company logo! People can buy stock in it, and refer to "My Bell" phone company.
Three dits, four dits, two dits, dah!
Radio, radio, rah rah rah!
In the case a better predictor of the future is to look at past performance; the past performance of Michael Capellas. This guy turned Compaq around and sold it. He turned MCI around and sold it. Michael's the reliable predictor here, not the random number generator.
Assuming that much debt is a problem. OTOH, Verizon gains millions (exact number?) of consumer customers and thousands of business customers. It also eliminates a competitor.
All in all, a very smart deal for Verizon. It's just very bad for those of us that live in Verizon's territory. Good thing that I have the choice of different carriers (for now).
Why would a board approve a purchase for less money than a competing offer? Under-the-table payments to board members is the only plausible reason that comes to mind. Are there other explanations? Whatever the explanation is, I have a hard time seeing how "increasing shareholder value" comes in to it...
One of the things they look at is their own security; is the new company going to purge the board and replace them? Another is what they plan to do with the company; are they going to gut it and sell off the parts, making your options worthless? There's a lot more to a deal than just stock price. Maybe the board just doesn't like the attitude of the higher bidder. Money isn't *always* everything.
-- If god wanted me to have a sig, he'd have given me a sense of humor.
I think some folks either don't have a sense of humor and/or consider any attempt at humor off topic. Or, god forbid, we have Slashdotters who don't know about Tolkien.
No Nyarlathotep, No Chaos
Know Nyarlathotep, Know Chaos
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.
Is it actually coming back to this?
Although funny, I guess their was some truth to it. But the real question comes to whether this is good for the telecom industry or not. I guess so in ways, but I think that only time will tell. It is kind of sad to see what used to be the biggest names in telecom bought out, and possibly destroyed, especailly stuff like this.
The DeathStar was broken up into little pieces, but apparently the dark side of the Force is bringing them back together. Admiral Vonage and General Skype will lead the rebel alliance Help us, Obi-For-Wan-Wan, you're our only hope!
See heret esla/projecttesla.html
http://www.geocities.com/Area51/Shadowlands/9654/
Nicola Tesla (the inventor of AC power) pioneered a wireless transmission method as well.
Cheers
nothing is real
You'd rather they evaporated entirely, disabling one of the internet backbones, leaving 75 government agencies and much of the Fortune 1000 without phone and internet service, putting hundreds of thousands of people out of work, and completely destroying the investments of people taken in by the accounting fraud? Maybe the assets and obligations should go to some organization capable of managing them honestly?
This isn't really the same MCI that was involved in accounting fraud, because the individuals involved in the fraud aren't there any more. Even if they were, after being bought by Verizon, they wouldn't be in charge any more. The idea that a corporation is a legal entity with rights and responsibilities is a useful fiction in making the law function at all, but it doesn't actually make sense to talk about "the same MCI" from then to now.
I'm surprised at the knee-jerk alarm about this merger. Do you people really think that this is going to lead to monopoly?
Hardly. For one thing, there are still a ton of telecom providers out there... it'll be Verizon, AT&T, BellSouth, Qwest, and two dozen smaller regional carriers. All these mergers have accomplished is the undoing of the ill-considered 1986 telecom act, which said you couldn't do both long-distance and local telephony. Now the big guys do both.
But more importantly, there's more competition than ever before in the industry because of emerging technologies and the net. Voice over IP providers --including pure-play guys like Vonage, as well as all the cable companies-- are starting to compete with the phone companies. So AT&T and Verizon are going to have to stay competitively priced in order to keep from losing customers to those services.
And have you ever heard of cell phones? The wireline carriers can't crank up costs, because they're already losing people to their mobiles.
Not that it matters, but I'm a liberal and usually object to any conglomeration of corporate power. But it's silly to instantly panic at any sort of merger and assume it's a nightmare.
All these companies are doing is trying to stay alive in the face of killer new technology. The only people screwed here are the carriers themselves.
A: Cthulhu reforms 15 minutes later, except now Cthulhu is radioactive.
Q: So, what's next for the telecom industry?
A: It reforms 25 years later into Ma Bell, except now it controls everything.
There is another reason.
MCI's largest cost is line cost (the cost of leasing lines from other carriers) and Verizon needs a data network. After the merger, MCI does not have to pay line costs to Verizon anymore and Verizon gets a data network. It's a win-win for both companies.
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
Lawyers, MBA's, RIAA? A jedi fears not these things!
Let me share a personal experience with merging companies. I worked for a company that was in bankruptcy. After working hard for several years, the company pulled itself out of bankruptcy and went public. Not too long after that we merged with a different company. At first the new company wanted to run things the way they had before, but soon realized that they were over their heads. Everyone sat down and worked out which things would be best for the combined company. Some things were taken from one company and other from the second company. Things that worked were accepted and things that didn't work were dropped. In short, it was the ideal merger.
Unfortunately, it did not last. After a couple of years, the new company bought out a third company. This third company was in bankruptcy with little or no hope of pulling itself out. I helped on the discovery/review process and found several things in just one department where they were losing money hand over fist because of poor practices. We bought them anyway. After we purchased them, we let all the management of the parent company go, and promoted the management of the company we had just purchased. The management then tried to impose the same practices that had put them in bankruptcy on the parent company. After a few clashes with management, my job title was eliminated and I was offered severance. I took it and ran. Since then the company I was with has been purchased twice.
I really hate to think what those executives who ran at least two companies into the ground are doing now.
Great civilizations have lived and died on false theories. Don't mess up mine with a few facts.
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.
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.
ceci n'est pas un sig.
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.
It's finally time to replace that obsolescent breep-breep ringing noise on the handsets with the throaty screech of Godzilla.
You can't talk about Wikipedia's flaws on Wikipedia
Unless that one bill alone costs double what the five would.
Hopefully I didn't put any [] around my words.
Say what you will about capitalism, but it is almost the sole reason that the standard of living has risen so much in many countries over the last three centuries or so.
There is no finer systerm for taking a society from an agrain to a post-industrial culture. However, I think most of the ills we are suffering these days arise from capitalism. Whether it's corporate conservatism (RIAA, DMCA, etc), monopoly and consolidation (Microsoft, mergers), or the rollarcoaster ride that is our economy (How many of you went poor ->millionaire->poor in a a year or two? How many of you have houses that have inflated 400% in the last year or two, and will likely loose all that and more in the next couple?), captalism is failing us every day.
I'm sure the European Aristocracy that the cultural and industrial revolutions of 1700's replaced were congratulating themselves how much they had improved their standard of living over the old days. But they couldn't see outside the limits of their (*gasp*) class, or how their own system had become rotten and evil. It's funny how despite what High School history teachers tell you, learning history never stops us from repeating it. Life is shifty and will disguise itself. Maybe it's time to revolt again.
Comcast and Warner today operate under "gentleman's agreements" not to enter each other's territories, thus granting themselves monopolies and the ability to price-gouge where they currently are.
And no, no county does "franchises" for cable. Look at Milwaukee for a good example of how it USED to work - prior to the death of Viacom cable, there were two COMPETING cable companies in that county. The only reason no other cable company's come by since is that TW threatens to go into their existing counties and deliberately undercut their prices, running at a loss till they drive the competition out of business.
What's interesting about all of these acquisitions is that yes, in the short term, it may reduce some degree of choice we once had as consumers. But bear in mind, that just as old, crusty, entrenched companies can be laid to rest by merging with other old, crusty, entrenched companies, there is always room for new competitors. Simply put, the monopolies resulting from these acquisitions still need to stay on their toes, lest the carpet be yanked out from under them by newer, leaner, more innovative, more agile, competitors.
Um, Verizon does *not* own Level 3 last I knew, and I just rechecked google to make sure that hadn't changed.
so, along comes MCI, emerging from bankruptcy, retaining all the capital/equipment/etc/etc that they need to run a telecom company, but without any of the debt.
Do you think this would allow them to be more competitive in telecom than the companies that are already up to their eyeballs in debt?
::Sigh::
::sigh::
Good thing we broke up MA-Bell so we wouldn't have one company monopolising the entire phone system. Thank god we were smart enough to not break them up into smaller monopolies that ran different parts of the country and could get enough to buy up each other and eventually reform Brother-Bell, and Sister-Bell, which marginally compete.
RandomAndInteresting.comdefending the world from stupidity since 1979
I agree with your annalysis on a general and historical basis, however, the sustainability of capitolism is what worries me. I'm no economist, so if anyone can tell me why this line of thinking is wrong, please do...
y cle you give away with a five year service contract. They don't even pass the credit check for your home phone service. they can dial 911 and toll free numbers because the law says you have to let them, but thats it.
Once all the mergers have taken place, and all the costs have been cut there are two very different sides to the results.
1) Stock holders are happy, customers are happy. Costs go down, profits go up, services improve.
2) Employees loose jobs. Greater efficiency of a larger single organization dictates a reduction in staff to serve the previous customer base.
Result number two is NOT indefinately sustaianable as far as I can see. Historicaly large mergers send about 10-30% of the total merged workforce to the unemployment lines. With the added pressue of increasing population growth and longer lived workers the only long term result that i can see is massive unemployment and further rifts between the rich and the poor.
When you are part of the five member team operating the world's largest telecom (efficiency and cost cutting to the max to get here) you pull down a pretty good salery...or do you? Who do you sell your service too? The other 400,000,000 people who used to do your (and your four co-workers) Job(s) are unemployed, on Government support and can barly afford food, let alone the latest cellular tele-palm-vibrator-microwave-oven-tv-car-tent-bic
Sure you still have the Government buying your service, but now they've followed your lead and are down to a staff of 17 humans and an artificial intelegence budget calculator.
these are silly extremes, but there will be problems (social and political to mention just two) long before this sort theoretical insanity ensues. I feel that we are teetering awfully close to this edge already and if the governments of the world allow capitolism un-checked reign for much longer we are looking at a class War. Not a polite little small "w" war, but a big nasty guns and death and hatred big "W" War.
I work in a town where 70% (thats a REAL FIGURE) of residential property is owned by out-of state investors and the only jobs left for locals born in the area are service related. This works for now. People don't starve, and they don't live on the street, but the underlying resentment is DANGEROUSLY close to comming above the water line. and like I said, no one starves here.
Just wait untill the merger of MCI-WORLD-AT&T-VerizoPhone with EuroTel-Virgin-FranceTel puts 40% of the western world's telcom workers out of a job.
Governments are supposed to regulate things so that they don't get out of hand. there's a fine line between de-regulation and anarchy (I'm looking at all the Libertarians here...) And i think we need less of both.
A Call For A New Slashdot Moderation Level!
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.
You have violated Robot's Rules of Order and will be asked to leave the future immediately.