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Verizon Completes MCI Purchase

April 8, 2005

Verizon/MCI • Verizon Completes MCI Purchase • FCC approves AT&T, MCI Deals • Justice Dept. OKs AT&T, MCI Sell-Outs • Consumer Groups Oppose Big Telco Mergers • MCI Stockholders Approve Purchase By Verizon • Verizon Wins the MCI Bidding • Verizon Acquiing MCI

Verizon has completed its $8.5 billion purchase of disgraced long-distance carrier MCI, paying much more than it initially intended, thanks to rival Qwest's running up the bidding.

Verizon hopes the MCI brand name -- now roughly the equivalent of mud to most consumers -- will enable it to snag more high-paying business customers, the kind who buy data circuits and network services in addition to long distance. MCI has about 60,000 large corporate customers in 150 countries. With SBC buying AT&T, Verizon feels it needs a leg up in the corporate market.

Upon completion of the deal, short-time MCI Chief Executive Michael Capellas, 51, retires with an exit package valued at $39.2 million.

"Our strategy is to be a customer-focused leader in consumer broadband and video, as well as business and government services, in both the landline and wireless environments," said Verizon Chairman and Chief Executive Ivan Seidenberg in a statement. "We believe that our superior networks are the basis for innovation and competitive advantage in communications."

Most consumer organizations opposed both the MCI and AT&T acquisitions, saying there's already been too much consolidation, leading to less and less competition and higher calling rates. Others argued that the real competition these days is coming from cell phones and Internet phone service, including that provided by cable TV companies.

MCI was an early innovator in long distance after its disastrous purchase by Worldcom became part of the biggest corporate bankruptcy in history.

Among innocent bystanders affected by the deal are sports fans in Washington, D.C. MCI got its start in D.C. and for years the city's downtown sports arena has borne its name. The arena, which is home to the Wizards, Capitals and Mystics will now be known as the Verizon Center.

In the San Francisco area, Giants fans have been mourning the switch from SBC Park to AT&T Park and a spirited petition drive has suggested renaming it Mays Field in honor of Willie Mays.

The latest deal establishes Verizon as the nation's number two telecommunications company. AT&T, formerly SBC Communications, is the largest. That raises the question of what happens to BellSouth and Qwest, the two remaining regional Bell companies. The most likely outcome is that they become prime acquisition targets.

All involved deny that any such deal is in the works.

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