Verizon Acquisition Could Mean Lower Phone Bills for New Yorkers
Posted on: Tuesday, 15 February 2005, 00:00 CST
Feb. 15--CAN YOU HEAR IT NOW? New York's hometown phone company is expanding its national presence -- and may soon be giving local customers a break.
Verizon's $6.7 billion buyout of MCI brings the top local provider the goods to make a bigger national splash in the cutthroat markets of business calling and Internet connections.
"This is the right deal at the right time ... the acquisition accelerates Verizon's growth plan in the [business] market," said Verizon CEO Ivan Seidenberg of his company's decision to bring the former WorldCom into the fold.
New Yorkers using Verizon could see their phone bills start edging down once the company realizes savings of running long distance calls under the MCI label it will soon own, spokesman Eric Rabe said yesterday.
The merger also is expected to bring 7,000 layoffs -- 3 percent of the firms' combined workforces -- mostly in back office areas like human resources and information technology. Only a small chunk of those pink slips are expected to be local, Rabe added.
When the deal goes through -- shareholder and regulatory approvals could take up to a year -- it would create the second dominant player in the quickly consolidating telecom industry. The others will come from a combination of SBC and AT&T, which announced plans to merge two weeks ago. And the matching of Verizon's local networks and financial might with MCI's Internet pipeline and business customer list will be tough to beat, analysts said.
"These two [sets of merged companies] will dominate the industry," said telecom analyst Drake Johnstone of Davenport & Co. "As Verizon pushes broadband into the home, it will need the Internet backbone of MCI."
Moreover, adding MCI, the No. 2 business phone provider, will make it easier for Verizon to pitch corporate customers that are traditionally AT&T clients.
Indeed, despite a 2002 bankruptcy filing spurred by a series of WorldCom accounting scandals -- one that now has founder Bernie Ebbers on trial for fraud -- MCI still has a top-notch Web infrastructure that carries a third of the world's Internet traffic.
And MCI shares are up close to 50 percent since the company broke out of bankruptcy last April, despite continued losses.
That made the company appealing to Verizon, which beat out a bid from Denver-based Qwest even while acknowledging the merger will depress profits by 10 cents a share in the first year.
"The deal makes sense," Johnstone said. "Verizon already has the local market connections, and I think the [combined] company will be even better positioned than SBC-AT&T to move into the business market."
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Source: Daily News
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