Qwest for a Meeting

Is Qwest (NYSE: Q  ) the Rodney Dangerfield of the telecommunications industry? Skeptics abound over the company's $8 billion bid for MCI (Nasdaq: MCIP  ) . And CEO Richard Notebaert says no one at MCI will talk to him. Instead, he's been given the corporate equivalent of an open-field stiff-arm as the telco runs toward preferred suitor Verizon (NYSE: VZ  ) .

Smarting but still full of fight, Notebaert decided to take his case directly to MCI's owners in an investor meeting in New York today. And that's made for an ugly spat now playing out in the press. For example, Notebaert wrote Monday in a Wall Street Journal editorial that an MCI deal with Verizon would crimp competition in local markets. Verizon executive vice president Tom Tauke countered by intimating in a statement that a Qwest buyout of MCI could threaten national security. Yeah, OK.

The hyperbole from both sides is troubling, though Tauke's shot is probably more ludicrous. (Seriously. Qwest as a national security threat? Come on, guys.) But the public debate is bound to have at least some positive side effects. For one, it should give MCI shareholders and regulators a lot to think about and plenty of readily available material to study. Indeed, right now, the Securities and Exchange Commission's EDGAR database is chock-full of documents describing both offers, and they're available to anyone, at no cost. Here's a link to Verizon's presentation. Qwest's, posted this morning, is here.

A review of both bids reveals that each company has given careful study to how it would benefit from an MCI takeover. Verizon thinks it will deepen its relationships with enterprise customers and will be able to offer a better mix of voice and data services. Qwest, on the other hand, sees operational leverage and the opportunity to create a stable firm capable of competing aggressively with Verizon, Motley Fool Stock Advisor recommendation SBC (NYSE: SBC  ) , BellSouth (NYSE: BLS  ) , and others for big deals. Both visions make sense.

What doesn't make sense is ignoring Qwest as a suitor simply because of its past struggles. Fortunately, the cold shoulder is likely to end after today. Consider this statement from Bruce Berkowitz, chief executive of Fairholme Capital Management, which holds roughly 3% of MCI's outstanding shares, in an interview with The Wall Street Journal: "I think the Qwest offer has more value. But which offer is better right now doesn't matter to me, because I can't see how the MCI board can make the decision without talking to the other side, especially when it doesn't cost them anything."


For related Foolishness:

Fool contributor Tim Beyers thinks that, despite claims from the PR folks at MCI, the company hasn't been the "model of corporate governance." What's your take? Share your thoughts with other Fools at the Qwest, Verizon, and MCI discussion boards. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has a disclosure policy.

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