Verzon seals MCI takeover
US-based telecoms group Verizon Communications today said it was buying MCI, the former collapsed WorldCom group, for $5.3bn (€4bn).
New York-based Verizon beat off competition from fellow US telecoms group Qwest Communications for MCI, which employs almost 2,000 people in the UK and has changed its name from WorldCom, after suffering bankruptcy and a huge financial fraud.
A Verizon spokesman said it was too early to say what the implications of the deal would be for MCI’s Reading-based UK operation.
MCI provides voice, internet and data communications to 20 million customers in 65 countries. Its European, Middle Eastern and African (EMEA) division was not directly affected by the Chapter 11 bankruptcy process involving its US counterpart.
The company said last April that the US arm’s emergence from Chapter 11 was good news for EMEA, which accounted for 12.5% of the group’s revenues and retained its top 100 customers during the crisis.
Verizon is the dominant local phone company in the north eastern US and a top mobile phone player, with 44 million voice and data customers in the country.
MCI, based in Ashburn, Virginia, emerged from bankruptcy last spring after a multibillion-dollar accounting scandal which nearly destroyed the company.
Former chief executive Bernard Ebbers is currently being tried on criminal charges in the fraud, which boosted the profits WorldCom reported by hiding billions of dollars in expenses and inflating revenues.
MCI, once worth $180bn (€139bn) on the stock market, wiped away most of its debt in the bankruptcy reorganisation.
However, a mix of price wars, unfavourable regulatory changes and competition from cell phones and internet-based calling prompted MCI’s bosses to court prospective buyers.
The boards of both companies have approved today’s agreement, which represents the third big US telephone merger in two months. The purchase price was about a half billion dollars below what Qwest offered for MCI.
Verizon chairman and chief executive Ivan Seidenberg said the merger was “the right deal at the right time".
“It is a natural and logical extension of Verizon’s strategy to transform our company to serve growth markets and offer broadband technologies,” he said.
