Qwest’s long battle for MCI may be over after shareholders controlling nearly three-quarters of MCI stock re-elected on Monday the board that approved the Verizon merger.
“A good portion of Qwest’s support has headed for the hills,” said Scott Cleland, chief executive of Washington-based Precursor Group.
Qwest had a different interpretation of the vote and left its options open Monday. The Denver-based regional Bell still could launch a hostile bid for MCI before a summer MCI shareholder meeting to approve the Verizon merger. Or it could sell off assets and acquire smaller long-distance companies.
“Today’s vote demonstrates that a significant portion of MCI’s shareholders are unhappy,” Qwest said in a prepared statement. “That being said, we will continue to do what is in the best interests of our shareowners, customers and employees.”
MCI’s largest shareholders, who have benefited financially from the MCI bidding war, continued Monday to push Qwest to get back in the contest.
“I thought Qwest got an extraordinary share of support today,” said Leon Cooperman, whose Omega Advisors owns about 3 percent of Qwest. “The MCI shareholders won’t vote down a Verizon proposal unless there is an offer on the table from Qwest.”
Analysts had predicted a fiery showdown between MCI’s board and angry shareholders at Monday’s shareholder meeting in Chantilly, Va. Instead, there were only 50 shareholders present and no questions.
“The large MCI shareholders were doing a lot of saber rattling,” said Richard Nespola, chief executive of the Kansas-based TMNG consulting firm. “But it didn’t add up to much.”
Many analysts agree that buying MCI may be the best option for Qwest, which has $17 billion in debt, no wireless operations of its own and an underused national fiber- optic network.
Qwest chief executive Richard Notebaert is credited with saving Qwest from bankruptcy three years ago and generating positive cash flow from a shrinking local phone business. But Qwest needed MCI’s $5 billion in cash and corporate customers to jump-start its long-distance business.
Qwest announced on April 29 that shareholders controlling more than 50 percent of MCI stock favored its $30-a-share bid for long-distance carrier MCI.
But three days later, MCI accepted a $26-a-share offer from New York-based Verizon, the largest U.S. telecommunications company. Qwest withdrew its offer immediately.
Monday’s meeting was considered a straw poll among MCI shareholders as to whether Qwest has enough support for a hostile bid.
Out of a total of roughly 280 million shares voted, shareholders controlling about 80 million MCI shares withheld support from MCI’s board.
“It’s less than Qwest wanted,” said Tim Gilbert, an analyst with Principal Global Investors of Des Moines, Iowa. “Qwest probably will not get back in the contest.”
MCI chief executive Michael Capellas appeared upbeat after Monday’s meeting. “We’re moving on,” he said.
Bruce Berkowitz of Fair- holme Capital Management, which owns 3.3 percent of MCI, met with Capellas on Friday but still withheld support for the board Monday.
“Qwest should come back to the auction,” he said. “But if something doesn’t happen this week, it’s over.”
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
