updated 4/5/2005 8:50:57 AM ET 2005-04-05T12:50:57

Verizon threatened Monday to abandon its $7.5 billion buyout deal for MCI Inc. rather than pay more should the long-distance telephone company declare a rival $8.9 billion offer from Qwest as superior.

MCI's shares fell sharply after the announcement, which came one day before a deadline set by Qwest Communications International Inc. for MCI to accept or reject its bid.

In a statement, Verizon Communications Inc. said, "If the MCI board, capitulating to Qwest's artificial deadline, declares this bid to be `superior,' it would seem to us that the decision-making process is being driven by the interests of short-term investors rather than the company's long-term strength and viability."

"Should this occur, we would no longer be interested in participating in such a process," the statement warned.

MCI declined comment on the latest tactical move in the two-month bidding war. It also wouldn't say whether it planned any response before Qwest's deadline.

Shares of MCI fell 21 cents to close at $25.08 in Monday trading on the Nasdaq Stock Market despite rising as high as $25.50 earlier in the session amid hopes the bidding will produce a higher takeover price.

Verizon's shares jumped 46 cents to close at $35.65 on the New York Stock Exchange. Qwest rose 18 cents, or 5 percent, to close at $3.82, on the NYSE.

The Verizon deal values MCI at $23.10 per share, to be paid in stock and cash. That's an increase from $20.75 under the agreement the two companies reached in mid-February.

Qwest's offer is worth $27.50 in cash and stock, nearly 20 percent more than the latest Verizon deal.

But worries about Denver-based Qwest's weak financial health and the long-term value of its shares have twice prompted MCI's board to accept lower-priced offers from New York-based Verizon as a safer alternative.

Verizon's statement made the case that those concerns are still legitimate.

"Verizon believes that the decision facing MCI is not about the math of a particular moment in time; it is about good business judgment, the best interests of shareowners and the long-term viability of the new company. Based on these criteria, Qwest has submitted what we believe to be an inferior offer."

Qwest has argued that in addition to offering a higher payoff for MCI investors, its merger proposal would have less of a harmful impact on competition, and therefore have an easier time gaining state and federal approval.

Before raising its bid last week, Qwest hired a proxy consulting firm, a sign it may seek a direct vote by MCI shareowners on its latest offer if it is rejected by MCI's board.

Verizon and Qwest are two of the nation's four big local telephone companies, with Verizon dominating the eastern part of the country and Qwest serving the Rocky Mountains and Pacific Northwest. MCI is based in Ashburn, Va.

The jousting over MCI, the biggest telecom takeover battle since the height of the Internet bubble, was set off by AT&T Corp.'s late-January agreement to be acquired by SBC Communications Inc.

Like AT&T, MCI is steadily losing revenues and customers with the collapse of long-distance calling as a viable standalone business.

Both MCI and AT&T, however, retain valuable assets with their millions of customers and national fiber-optic networks.

The new deal with Verizon calls for payment of 0.4062 share of Verizon stock and $8.35 in cash for each share of MCI. The cash payment represents an increase of $2.35 from the first Verizon deal. The stock component is unchanged, although Verizon has agreed to boost that part if, by the time the deal closes, Verizon stock remains below $36.31 per share _ the price at which 0.4062 share equals $14.75.

Qwest's $27.50 bid, up from its prior offer of $26, consists of $13.50 per share in cash and $14 worth of its stock.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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