BUSH VOIDS REGS; AT&T, MCI LOSE
By BEN SILVERMAN
nypost.com
June 14, 2004 -- WHEN the White House refused to back the Federal Communication Commission's latest set of telecommunications regulations last week, it may have unwittingly lit the fuse on consolidation in one of America's most downtrodden sectors.
With the Bells in the clear to raise the rates they charge for local lines, the growing local phone businesses of onetime long-distance stalwarts AT&T and MCI may be prematurely retarded.
Both companies have long been regarded as takeover targets for the Bells, and each said last week that they might have to raise rates for consumers and would be forced to exit certain markets.
"If [AT&T and MCI] would have won this, it would have given them longer life support, and it would have the given the Bells more incentive to eliminate them," Patrick Comack, telecom analyst for Guzman & Co., told The Post.
"Now, they may be forced to sell — and at a much lower price."
Roiled by uncertainty regarding regulations, AT&T's stock has fallen by more than 25 percent this year. Shares of MCI, which trade on the pink sheets but are expected to move to the Nasdaq shortly, have fallen by more than 45 percent to date in 2004.
Rumors about an AT&T acquisition have swirled for more than a year. BellSouth is often considered the most likely acquirer, and at various times, it looked like a deal was imminent.
Of course, the asking price was always too high — but that might not be a problem now.
MCI, which many believe will be the focus of a battle between SBC Communications and Verizon, is a much more likely takeover target than AT&T — at least in the near term.
The company was able to dump almost all of its debt while it was in bankruptcy, and with a management team, board of directors and bondholders short on telecom experience, the company has essentially been rebuilt to be acquired.
"I don't think anyone believes that MCI has a long-term future as an independent company," a representative for an MCI bondholder told The Post.
One key player in all of this is Mexican billionaire Carlos Slim.
Slim, who controls Mexico's TelMex and is the richest man in Latin America, sits on SBC's board of directors. He also holds a 13.8 percent stake in MCI and a 9.9 percent stake in damaged, but still breathing, Global Crossing — another telecom takeover target — having picked up both stakes on the cheap while the companies were struggling with the bankruptcy process.
And though last week's win for the Bells would seem to be a loss for someone so heavily invested in MCI, that may not be the case.
"SBC wins, so Slim wins," one hedge fund manager told The Post. "The timetable for MCI's sale was just accelerated — so Slim wins again.
"And when MCI and AT&T get acquired, that leaves Global Crossing on the table for whichever Bell didn't grab one of the other two. The guy can't lose now." |
