Qwest sweetens MCI offer

NEW YORK — Qwest Communications International Inc. is raising its offer to buy MCI Inc. to $8.5 billion, adding nearly half a billion dollars cash to its bid to scuttle the long-distance phone company's merger with Verizon Communications Inc., a source familiar with Qwest's plans said Wednesday.

The sweetened offer, worth about $1.8 billion more than the current value of the Verizon deal, was expected to be announced early Thursday, the source said on condition of anonymity.

All three companies declined comment.

The Verizon-MCI deal calls for MCI's board to make a determination whether any rival bid is "superior." If the deliberations lead to that conclusion, Verizon would have five days to respond with a counteroffer.

Should MCI's board either reject the new Qwest proposal or agree to an improved Verizon offer, Qwest could still try to take its bid directly to shareholders. That potential proxy fight would likely be resolved in May at the MCI shareholder meeting to vote on the Verizon deal.

Earlier Wednesday, Verizon sent a sharply worded letter to MCI questioning Qwest's predictions of huge savings and future growth from a potential Qwest-MCI combination, citing Qwest's declining business and large debt load.

"No wonder there appears to be a desperate quality to Qwest's efforts to acquire MCI," Verizon chief executive Ivan Seidenberg said in the letter. "Qwest fails to explain the financial alchemy required to keep Qwest afloat, complete the acquisition of MCI, and invest in the business."

That letter prompted a statement from Qwest CEO Richard Notebaert.

"Our activities over the next 24 hours will demonstrate our commitment to winning MCI. It is unfortunate that some in the process feel MCI shareholders should be deprived of the true value of their asset," Notebaert said. "The new company will be financially strong, with significant free cash flow, and offer investors a unique growth opportunity. Let fairness, economics and the best interests of shareholders decide this matter."

MCI's shares fell 28 cents to close at $23.75 in Wednesday trading on the Nasdaq Stock Market.

Shares of Qwest, the local phone provider in 14 states across the Rocky Mountains and Pacific Northwest, including Utah, fell 4 cents to close at $3.82 on the New York Stock Exchange. Shares of Verizon, which dominates phone service in the eastern United States, dropped 34 cents to close at $35.34 on the NYSE.