February 14, 2005
Verizon is buying MCI for $4.8 billion in equity and $488 million in cash, continuing the trend of consolidation in the telecommunications industry. Qwest had offered more money but was left at the altar because of Verizon's stronger balance sheet.
With SBC in the process of acquiring AT&T, the transaction marks an end to the long-distance business.
MCI was the first major company to offer competitive long-distance services. After the break-up of AT&T, numerous players jumped into the business, most of them reselling MCI and AT&T capacity.
With flat-rate local/long-distance, cell phones that include long-distance and Internet telephone service, "long-distance" effectively no longer exists as a separate product.
Verizon executives said they expect to cut about 7,000 jobs from the combined Verizon-MCI workforce of about 250,000 employees.
The deal makes Verizon, the nation's largest local telephone company, into a major force in corporate communications and gives it a better shot at winning big contracts with global companies.
For MCI, Verizon says it will ensure that consumers and businesses will have a supplier with the financial strength to maintain and improve MCI's Internet backbone network, which is the largest in the world based on company-owned points of presence.
Verizon also says the deal will mean better service for enterprise customers by enhancing its ability to compete for and serve large-business and government customers with a complete range of services, including wireless and the most sophisticated IP (Internet Protocol) based services.
The Boards of Directors of both companies approved the agreement late Sunday night.
In addition to MCI shareowner approval, the acquisition requires regulatory approvals, which the companies are targeting to obtain in about a year.
"This is the right deal at the right time," said Verizon Chairman and CEO Ivan Seidenberg. "We have been evaluating a transaction with MCI for some time, and now we have the opportunity to reach an agreement at the right price that works for both companies and at a time when MCI is gaining momentum."
