3/31/2005

MCI still can't decide

Why is MCI having such a hard time deciding on what it is going to do? MCI has been getting great offers from Qwest, but still keeps thinking about settling with Verizon. Verizon's offer is 7.51 billion and Qwest's offer is 8.94 billion. I remember reading about this situation earlier, it stated that MCI was having a hard time settling with Qwest because of their finacial instability. Why do you think that this bidding has been going on for so long when MCI has basically made up its mind? Which company do you think that MCI should settle with?

4 comments:

Mack said...

I don't think that MCI has made up their mind as to which company to merge with. It is interesting to note that in class we are talking about oligopolies and how companies are always trying to push in that direction and here we have an example of just that. Perhaps MCI wants to have its shareholders decide and that way they don't have to make a difficult decision.

BOB said...

For MCI, it would probably be more beneficial to join with Verizon because of their financial stability. Qwest has been suffering lately but if they do win the bid with MCI, it will surely help their market share. One possible reason for prolonged negotiations is that MCI is trying to have Verizon raise their bid by simply entertaining Qwest's ideas.

rico said...

First of all, the priority of the Board is to put the shareholders first. This is a hard decision because it can be altered in the short run or the long run. The short run solution is to accept Qwest's bid because it results in a higher share price to the shareholders. In the long run, Qwest may not be a suitable choice for investors. The obvious decision for the long run would be to choose Verizon for long term stability and growth, which Qwest doesn't appear to be able to offer.

Dr. Tufte said...

I am starting to think the managers at MCI should be fired.

Rico's analysis is correct. The managers of MCI need to be thinking about shareholder value - and their shareholders get the best deal from Qwest. However, it isn't really relevent what the long-term prospects with Qwest are - those are already embodied in the value of the offer. Qwest is saying that they can see the long-run potential, and they have put the money on the table. Managers at MCI who do not take that deal are getting something on the side.