Qwest in talks with MCI shareholders - WSJ

NEW YORK, May 9 (Reuters) - U.S. long-distance telecoms operator MCI Inc. could be facing shareholder dissent over its acceptance of an $8.5 billion sale to Verizon Communications Inc., the Wall Street Journal reported on Monday.

Rival bidder Qwest Communications International Inc., which withdrew a $9.9 billion offer last week, was in talks with MCI shareholders and believed there could be enough support to vote down Verizon's bid, the paper said, citing people close to the situation.

MCI, the second-largest U.S. long-distance carrier, said at the time it had accepted Verizon's lower price because its large business customers had threatened to defect if it was sold to Qwest.

A vote by MCI shareholders on the Verizon offer, which appeared to end a 10-week battle for MCI, could be held as soon as late June or early July.

Some investors said a shareholder rejection of the Verizon offer would depend not just on Qwest re-entering the bidding but also adjusting its bid to limit the risk to MCI shareholders on the stock portion of a new Qwest offer, the Journal reported.

Qwest had not decided whether to re-enter the bidding, according to people familiar with the Denver company's thinking, the article said.

But Qwest's chief financial officer did not rule out some further action toward MCI in comments at an investor conference last Thursday, saying the company would "see where it goes from here."

At least two of MCI's biggest investors -- Leon Cooperman of Omega Advisors Inc., and Bruce Berkowitz of Fairholme Capital Management -- said they have called Qwest urging the company to reconsider its withdrawal, the Journal reported.

Berkowitz, whose Fairholme Capital owns about 11 million shares of MCI, told the Journal he was urging Qwest to round up MCI investors and get them to commit to Qwest's bid.

"It's obvious that every large shareholder I talk to would rather have Qwest," he said.

MCI spokesman Brad Burns told the newspaper: "We are confident our board made a decision that was in the best interest of all our stakeholders."

05/09/05 01:32 ET