MCI Corp. and Qwest Communications International Inc. are reportedly discussing a $6.3 billion deal that would be the telephone industry’s second blockbuster merger in a week, but some analysts think the bartering is meant to lure Bell rivals Verizon or BellSouth into a bidding war for MCI.
MCI and Qwest, both tainted by scandal in the collapse of the telecom bubble, are far enough along to discuss details like price and structure of a potential takeover by Qwest, but the deal could still break down, according to Thursday’s edition of the Wall Street Journal.
MCI, which changed its name from WorldCom when it emerged from bankruptcy nearly a year ago, declined comment on the reports, which come just days after AT&T Corp. agreed to be acquired by SBC Communications Inc. for $16 billion in stock and cash.
Qwest, which recently agreed to pay $250 million to settle a civil fraud case brought by the federal government, did not immediately respond to phone calls seeking comment. The Denver-based company is the dominant “Bell” provider of local phone service in 14 states in Rocky Mountain and Northwest regions.
Some experts viewed the news leak as a potential bargaining tactic on the part of MCI Chief Executive Michael Capellas to draw Bell rivals Verizon Communications Inc. or BellSouth Corp. into a bidding war.
“This is a good way for him to make sure MCI is in play and force Verizon and BellSouth to make a decision,” said Rich Nespola, chief executive of the industry consulting firm TMNG Inc.
The reports come only days after San Antonio-based SBC, the local Bell for most of the Midwest and Southwest, agreed to purchase AT&T, based in Bedminster, N.J., in a deal that would create one of the world’s largest telecommunications companies.
Last week, as reports of an impending AT&T-SBC deal emerged, Verizon executives were adamant that such a merger would not force a change in strategy with the acquisition of a long-distance carrier such as MCI, based in McLean, Va., or Sprint Corp., which is based in Overland Park, Kan.
On Thursday, New York-based Verizon declined to comment on the latest reports.
While its reputation remains somewhat marred from the massive WorldCom accounting fraud, MCI is attractive for its national network infrastructure and roster of corporate clients with national communications needs.