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Verizon-MCI Deal May Affect Business Customers

Verizon Communications said today it will acquire MCI Corp., the nation's second largest long-distance company, for more than $6.7 billion, creating a second large, full-service telecom company that can compete head-to-head with the SBC Communications-AT&T combination, which was announced two weeks ago. Executives heading up both Verizon and SBC have said their interest in selling more services to business customers was a driving factor behind the big acquisitions.

The Verizon deal beats out a larger bid for MCI made by Qwest Communications, a smaller regional Bell operating company. Verizon will pay $5.3 billion in stock and cash for MCI's shares and pay an additional $1.4 billion in dividends to MCI shareholders. Verizon also assumes around $4 billion in MCI debt.

The two companies have been talking about a deal since last summer, according to Verizon chairman and CEO Ivan Seidenberg. Talks accelerated once Qwest made a bid for MCI. But MCI, once known as WorldCom, ended up going with Verizon because it's a larger and financially stronger company, has a strong wireless operation, and has close relationships with many businesses in its service area, which includes Boston, New York, and Washington, D.C., analysts say.

The acquisitions will "produce great customer benefits," Seidenberg told investment analysts on a conference call. "We believe we can create a new way to think about going to market in the enterprise space. This is the right deal at the right time."

The acquisition combines Verizon's 6,600 local points of presence in 29 states, 53 million local-access lines, 3.6 million DSL customers, and a wireless network serving 43.8 million customers, with MCI's 4,500 points of presence on a global IP network that reaches into 2,800 cities in more than 140 countries. AT&T has around 3 million business customers; MCI has around 1 million.

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