This morning, I read an analyst report that simply stated, "Let the bidding war begin." That's because Qwest (NYSE:Q) today upped its offer for MCI (NASDAQ:MCIP) to $8.5 billion, or $26 per share, its third such bid for the company.

The timing is no accident, of course. Rival bidder Verizon (NYSE:VZ) gave MCI two weeks to negotiate with Qwest after MCI shareholders pressed management to consider the richer offer from the Denver-based telco. Today marks the deadline for those negotiations to end.

Qwest sweetened its offer by upping the cash portion of its bid by $1.40 per share. Were MCI to accept the terms, shareholders would receive $10.50 in cash and $15.50 in Qwest stock. The revised proposal puts ample pressure on Verizon to raise its winning $6.7 billion bid, which is now 27% lower than Qwest's best offer.

Scuttlebutt in the press says that Verizon will counter, probably offering $23 or $24 per share. It can certainly afford to do so, with more than $4 billion in cash in the bank. But there's another rumor floating around that strikes me as both plausible and intriguing. It says that Verizon would allow the Qwest bid to go through but then lie in wait for an opportunity to buy the combined company on the cheap, presumably after much of the integration work was complete.

Yeah, I know that sounds crazy. But you know what? Verizon never intended to pay a major premium for MCI. It was bargain shopping. Further, in the month since its winning proposal, Verizon has never once indicated it would counter Qwest's bid. Instead, it warned the world about the dangers of leaving MCI to Qwest. Yesterday brought another such salvo in a letter from Verizon CEO Ivan Seidenberg to MCI management.

So don't be too surprised if Verizon throws in the towel. And if it does, don't assume the game is over. It may be just beginning.

For related Foolishness:

  • Qwest finally completed its quest for a meeting.
  • Still, you have to wonder how MCI didn't know mating would take time.
  • Rumors have been flying since before Verizon even made an offer.

Fool contributor Tim Beyers 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, which is here. The Motley Fool has a disclosure policy.