Stakes Are Raised in MCI "Poker Game"
(10/15/97; 5:10 p.m. EDT)
By Kate Gerwig and John Rendleman, InternetWeek
The revelation Wednesday that GTE will bid $28 billion in cash for
MCI had analysts wondering aloud what such a deal would portend
for the pending bids from British Telecom and WorldCom.
"This is like watching a poker game, and someone just said the
table stakes are quadrupled," said Peter Bernstein, president of
Infonautics Consulting in Ramsey, N.J., who had expected to see
more bidding over MCI.
GTE's board is meeting Wednesday afternoon to discuss a bid,
according to published reports. Meanwhile, WorldCom's $30 billion
stock offer for MCI earlier this month is pending, as is a merger
plan between MCI and BT, which last year agreed to buy the
second-largest U.S. long distance company for $20 billion but later
lowered its bid to the $17 billion to $18 billion range because of
MCI's losses in its local service business.
If successful, GTE would add MCI's capabilities to its own local
telephone, long distance, and Internet services. In August, GTE
acquired BBN of Cambridge, Mass., a first-tier ISP, and renamed
it GTE Internetworking. GTE also acquired a long-term lease of
13,000 miles of fiber optic cable from Qwest Communications that
will allow it to build out its high-speed capabilities. The Qwest
network is expected to be online next year.
David Simons, managing director of Digital Video Investments, in
New York, last week said the WorldCom bid for MCI was largely
a function of high times on Wall Street. "The currency being used in
that deal is stock, and it's dependent on the continuation of a
roaring bull market," he said. "If the stock market goes down, the
money goes to money heaven. These things have a way of simply
not working out exactly as they seemed at first blush."
Bernstein agreed, adding that if he were MCI, he would take the
cash over stock. As part of this telecom acquisition frenzy,
Bernstein said he would not be surprised if WorldCom is itself an
acquisition target sometime soon.
Bernstein said he believes the bidding war is more about rounding
up MCI's customer base than its facilities, which by itself could be
more easily acquired without the burden of a high-cost consumer
business. |
