Verizon buys MCI
The dominoes are falling fact. Verizon's $6.8 billion dollar purchase of crippled MCI for its long-distance and business services is the latest in a series of big moves in the rapidly concentrating telephone business.
Verizon snatched MCI out the hands of rival Baby Bell company Qwest, which had a bigger offer (by $2 billion) on the table. The reason, according to various sources, is that the deal from either company involved stock, and Verizon is a stronger company and was offering healthier stock as part of the deal. While there is some concern about antitrust regulators objecting to the deal, everyone seems confident that it won't happen, especially in the current permissive atmosphere.
Verizon and SBC now are the dominant players in telephony. The MCI buy counters the SBC/AT&T deal very nearly, especially since Verizon bought MCI at a more favorable rate. Both companies are now major contenders for both business customers and residential long-distance. On the second tier are Bell South, Qwest, and Sprint, all made weaker by the deal. Qwest will be especially hurt by losing out on the deal, as its revenues from standard phone service are declining and it's saddled with $17 billion in debt. It may well be a candidate for the next takeover. One analyst stated in Information Week: "I think Qwest is headed into oblivion."
Rumors are now rife that MCI CEO Michael Capellas is now free to head up Hewlett Packard, with HP CEO Fiorina having been given the boot. Capellas lost his job as CEO of Compaq when that company was bought by HP several years ago. HE was brought in to reorganize MCI after the WorldCom accounting scandals. He's done his job, and now may be brought in to save HP. Round and round in the circle game.
6:32:52 PM 
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