Qwest isn't giving up

DENVER — Although its multibillion-dollar offer for MCI Inc. has been rejected a second time, Qwest Communications International Inc. isn't likely to be content to simply stay home in the Rockies.

The Denver-based company, with local phone service in 14 Midwestern and Western states, including Utah, and a nationwide fiber-optics network, will probably submit a sweetened offer to MCI's board or perhaps try a hostile takeover, several analysts said Tuesday.

The six-week, very public bidding war for MCI took another twist Tuesday when the Virginia-based long-distance carrier accepted a takeover proposal — valued at $7.64 billion — from Verizon Communications Inc. It was nearly $1 billion less than the most recent Qwest bid.

Qwest declined comment on MCI's decision, but chief financial officer Oren Shaffer provided some hints of what's to come. If MCI decides against Qwest, Shaffer told New York analysts at a conference, Qwest would consult with MCI stockholders.

"Right now, we think that the shareholders' interests and our interests are aligned," he said.

MCI's board has been concerned about partnering with Qwest, which is financially weaker than Verizon, the dominant local phone company in the Northeast and a top player in the cellular phone industry. Qwest is weighed down by $17 billion in debt, lacks a wireless division and faces growing competition from cable and high-speed data companies.

Still, analysts believe Qwest will press its bid for MCI.

"We do not expect that Qwest will completely abandon its pursuit of MCI and is likely to revise — increase — its offer and officially launch a hostile offer for MCI," Lehman Brothers analysts Andrew Whittaker and Blake Bath wrote in a research note published Tuesday.

Banc of America Securities analyst David Barden believes Qwest will take its bid straight to MCI shareholders.

"We expect any further bid from Qwest to emerge from a consultative process with MCI stockholders that still see a Qwest bid as the best option for maximizing their stock value," he wrote.

Analyst Donna Jaegers of Janco Partners Inc. said the process has been time-consuming for Qwest executives who should be focused on operations.

"I'm hoping Qwest gets the message and doesn't up its bid any further," she said.