The Mci Takeover Battle: Verizon Versus Qwest Harvard Case Solution & Analysis


This case is = about the merger of MCI with Qwest and Verizon. There seemed to be a tough competition in the industry which pushed MCI to merge with any of the two most suitable companies that can result in greater synergies respectively. There was an intense bidding war between GTE, British Telecom and World Com but later on the merger of MCI-WorldCom took place.

MCI faced losses in 2004 therefore; it is now trying to recover those losses by performing with either Verizon or Qwest. Even if WorldCom faced bankruptcy issues, it was able to merge with MCI. MCI has a vast network and it has coverage in most of the areas and it performed quite well already so WorldCom after getting merged with MCI made many major acquisitions.

 However, now it is considering boosting its profits so the directors will have to make a better decision which should primarily act in the best interest of shareholders respectively because of the fiduciary relationship between managers and the share owners. Apart from that, the price that was offered by WorldCom for MCI was $27 billion. It was because WorldCom was not willing to let other competitors to takeover MCI so it made a counter-bid as a result the price being offered by US domestic telephone company.

Question 1

Evaluate the two offers. What explains the two structures? In each case, what is the value to MCI shareholders?

 Evaluation of Offers and Structures

Evaluation of this merger includes two major competitors that are Verizon and Qwest. The price that has been offered by Qwest i.e. $8.4 billion is higher than the bid price offered by Verizon which is $7.6 billion. On the other hand, Verizon has made a quite a huge market in Wireless sector as compared to the Qwest which mainly focuses on wire line and even generating high revenues. However, if it wants to remain in competition, then it will have to switch its focus from wire line to wireless consumers because of the rapid growth in technology nowadays and apart from that technology plays a most important role in the success of company.

Despite the technology, if we consider both the competitors demographically, then Verizon is actually way ahead from Qwest. Verizon has mainly made its huge customer base in Northeast and Qwest was on the other able to make its presence viable in Northwest and West respectively.

On the other hadn, if the share price of Verizon is compared with Qwest then Verizon is having quite a high share price of $34.86/share and Qwest $3.79/share only. Also, it should be kept in mind that the western areas less populated and mostly there are landline users rather than the wireless users so, that’s why Qwest will have to take into account this very carefully if it is willing to make its merger viable and to satisfy the shareholders of MCI that in future it can make the prospects of the company better. However, Verizon is able to manage even a huge population in Northeast where the percentage of wireless customers is high. Therefore, Qwest has to make a huge investment in wireless equipments respectively if it wants to win the merger.

If we look from the Economic perspective then the telecom industry is extremely affected by the terrorist activities mainly in September 2011. As a result, the demand for technological products has also reduced. Despite this, there is a change in thinking of the customers also because they need everything as a single package. Therefore, by keeping the needs of customers in mind Verizon and Qwest should consider different ways in order to make their services much better and on the other hand MCI should also decide between two companies with which it will want to merge. Hence both of the companies have to take into account the socio-cultural issues respectively in order to make their image attractive to MCI.MCI takeover battle verizon versus qwest Case solution

Apart from this, MCI is the company that is having a low debt and it is able to make the future prospects of Qwest even if it is having an insecure financial statements. Also, it is quite important to mention that Qwest is highly geared company as compared to Verizon, which is only having a debt percentage of 28% almost as compared to the 71% almost of Qwest.................

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