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?"
* 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?
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
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.
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.
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!
Take a freakin' breather already.
It's called capitalism, and there's no time for that. 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. This wave on consolidation has long been predicted, and its probably a good thing. Otherwise the telecom industry would end up fragmented and mostly bankrupty, much like today's airline industry.
All in the name of screwing the consumer over, I'd bet.
All in the name of surviving is more like it. These acquisitions should produce one or more of two things.
1) Lower costs for the companies involved, resulting in higher profits and better returns for the companies owners (largely public shareholders).
2) Lower costs or better services for their customers.
It is likely to be a combination of the two. This assumes, of course, that Verizon does the merger well, and that they did their due diligence to make sure this was a good idea in the first place. At the end of the day, remember that you can choose not to be a customer of any company, except, perhaps, those that are monopolies.
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.