- The Washington Times - Monday, May 2, 2005

NEW YORK (AP) — Qwest dropped out of the bidding war for MCI Inc. yesterday after MCI agreed to another new deal with Verizon, rejecting a higher-priced bid from Qwest for the fourth time.

“It is no longer in the best interests of shareowners, customers and employees to continue in a process that seems to be permanently skewed against Qwest,” the Denver-based company said in a statement. “We pursued MCI with tenacity and discipline and feel strongly that our bid would have brought far more value to MCI shareholders.”

A spokesman for Qwest Communications International Inc. said the decision to retreat was “final.”

Shares of MCI fell 3 percent after the announcement, dropping below the $26 per share Verizon Communications Inc. has agreed to pay. Qwest had offered $30 a share in cash and stock.

MCI fell 83 cents to $25.70 yesterday in Nasdaq Composite Index trading. Verizon’s shares also fell, sliding 83 cents to $34.97 on the New York Stock Exchange. Qwest shares rose 5 cents to $3.47 on the NYSE.

The announcement came hours after Ashburn, Va.-based MCI announced an improved $8.5 billion deal with Verizon that still pays shareholders $1.3 billion less than what Qwest had offered.

MCI, the struggling long-distance phone company formerly known as WorldCom, declined to discuss Qwest’s announcement. Verizon, one of the nation’s two biggest local and wireless phone companies, also declined comment.

Qwest, the local phone company for 14 mostly Western states, had been poised to finally win the MCI board’s endorsement had Verizon not delivered an improved proposal by the end of yesterday. That was the deadline Qwest had set for withdrawing its $9.85 billion bid.

With its latest rejection, Qwest bristled anew at its treatment by MCI. Qwest also rejected the negative appraisal of its financial health and business prospects that MCI’s board used in justifying a lower-priced deal with Verizon.

“By accepting a lower offer, without even contacting Qwest, and by reportedly allowing Verizon to instruct MCI to impugn Qwest, it is only fair to conclude that MCI is more interested in bending to Verizon’s will than serving its shareholders,” the Qwest statement said.

“Unfortunately, the latest in a string of decisions reconfirms what we have believed all along: that MCI never intended to negotiate in good faith with Qwest nor maximize shareowner value,” the statement said.

The new deal with Verizon marks the second time that company has been forced to pay more in what became the biggest telecommunications bidding war since 1999 — when Qwest Communications Inc. outgunned Global Crossing Ltd. to acquire the Baby Bell US West during the technology bubble.

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