Verizon floats an offer for MCI

Whichever way the market goes, one thing is for sure, no one wants to may more than $6.5 billion for MCI. Today Wall Street Journal reports that Verizon has floated an informal offer of around $6.3 billion, around the same price as what Qwest is offering. Qwest’s precarious financials make it tough for the company to raise the offer it can really make for MCI, so Verizon has no incentive to increase the price. Qwest has about $17.2 billion in debt and $1.81 billion in cash. This is clearly an interesting development, but I cannot figure out why Verizon wants this can of worms. Qwest could use MCI to prop up its balance sheet. In reality, only $5 billion of MCI’s roughly $20 billion in sales is coming from large companies and accounts for 36% of its pre-tax profits. Every other product category, it is losing market share to either rivals or seeing revenues drop because of falling prices. In 2005, MCI sales are expected to decline 17% to about $16 billion. MCI’s chief strategist, Jonathan Crane, recently told The New York Times that the company is running against the clock. “It’s a foot race,” Crane told the Times. “It’s a transformational foot race.”

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