- The Washington Times - Monday, March 28, 2005

NEW YORK (AP) — Qwest issued a deadline to MCI yesterday, giving the long-distance telephone company one week to decide whether it will jilt merger partner Verizon in favor of a richer buyout proposal from Qwest.

The ultimatum was delivered in a letter to MCI’s board that also said Qwest Communications International Inc. lenders have committed an extra $500 million in financing to back the $8.45 billion bid, which is worth $1.9 billion more than the Verizon deal.

MCI Inc., formerly known as WorldCom, declined to comment on the letter or on whether a week of negotiations with Qwest had proved fruitful. The MCI board met yesterday, but it was not clear whether any announcements were imminent.

Verizon Communications Inc. agreed last week to give MCI until the end of the day yesterday to meet with Qwest. There was no requirement, however, that MCI immediately issue a verdict on those talks or on Qwest’s efforts to dispel worries that its financial ailments make its higher bid too risky to accept.

Qwest’s letter said it now has $5.75 billion worth of outside financial backing and has submitted a revised proposal to MCI.

“Since both of us recognize the importance of reaching a decision promptly, we think it is reasonable to inform you that if we have not executed an agreement on or before midnight, April 5, 2005, our offer will be withdrawn,” said the letter from Chief Executive Officer Richard Notebaert.

The deadline may turn the tables on MCI, which until now has set most of the rules for Qwest’s unsolicited courtship.

Having spurned Qwest’s original $8 billion offer, MCI has seemed to hold the upper hand. Its board has shown little enthusiasm or urgency to discuss even the sweetened $8.45 billion bid Qwest submitted two weeks ago despite growing pressure from some MCI shareholders to consider the higher bid.

Under the terms of its merger agreement with Verizon, reached in mid-February, MCI has several options at this point.

The company could reject Qwest’s courtship again and stick with Verizon, or it could declare Qwest’s bid “superior,” a determination that would trigger a five-day window for Verizon to respond with a better offer.

MCI also could try to buy itself more time by announcing that the Qwest offer has the potential to produce a superior deal, though the deadline set by Qwest could make that option less likely.

Qwest, the local phone company in 14 Western states, expressed confidence that worries about its financial health have been put to rest.

“Over the holiday weekend we have strengthened [financing] commitments in significant respects in response to the MCI Board’s requests made through its advisors on Friday,” Mr. Notebaert’s letter said. “We believe there is [an] agreement that our financing plans are reasonable and backed by strong commitments.”

Denver-based Qwest has offered $26 per share for MCI, consisting of $10.50 in cash and Qwest shares worth $15.50.

Verizon, which dominates phone service in the Northeast and Mid-Atlantic, has agreed to pay stock and cash currently worth $20.10 per MCI share. That includes $6 cash and Verizon stock currently worth $14.10.

Shares of MCI fell 32 cents to $22.94 on the Nasdaq Stock Market. Verizon shares fell 4 cents to $34.72 and Qwest shares dropped 3 cents to $3.75 on the New York Stock Exchange.

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