Qwest quits MCI acquisition bid

By Yuki Noguchi
Washington Post

WASHINGTON — Qwest Communications International Inc. has ended its pursuit of MCI Inc. and is now training its sights on smaller acquisition targets.

Qwest chairman and chief executive Richard Notebaert last week told shareholders that the company may seek new opportunities for mergers or acquisitions, nearly a month after losing its bid for MCI to Verizon Communications Inc.

"Qwest may initiate partnerships, mergers, acquisitions with smaller companies ... those opportunities may be very real," Notebaert said at the annual meeting in Denver. Regulators may force SBC Communications Inc. and Verizon to sell off parts of their businesses as a condition of approval for their mergers with AT&T Corp. and MCI, he said, creating other opportunities for Qwest to pick up assets.

After weeks of speculation that Qwest would re-enter the bidding war for MCI through a hostile takeover attempt, Notebaert flatly denied that Qwest was interested. "We aren't looking at MCI. That's over," he said at the shareholder meeting. "Now we're going to have to (grow) but do it in parts."

This year, Notebaert spearheaded a three-month campaign to acquire MCI of Ashburn, Va., which would have given Qwest much-needed cash as well as a network and a roster of business customers outside the 14-state region in which it sells local phone service. Notebaert said the combined company could have cut $14.8 billion in costs and as many as 15,000 jobs.

Although some Qwest shareholders expressed dismay at Notebaert's dogged pursuit of MCI, he defended that strategy, saying he still hears from MCI shareholders who support Qwest's bid.

Ultimately, Qwest withdrew after MCI's board of directors repeatedly spurned Qwest's sweetened offers and stuck with its agreement to sell the company to Verizon.

Notebaert said both the pending SBC-AT&T and Verizon-MCI mergers would result in a concentration of power in the industry that could harm customers, and he has urged antitrust regulators to force the companies to sell off some of their assets.