Verizon to buy MCI

Verizon will buy MCI in a deal valued at $6.6 billion, in stock and cash, company officials announced today.

The deal, rumored for weeks, will give Verizon greater strength among government customers, as well as larger businesses, Verizon officials said in announcing the deal.

"This acquisition builds on and accelerates Verizon's growth plan in the enterprise market, and it facilitates our becoming a major provider in that market sooner and less expensively than if we had continued on a path of organic growth," said Ivan Seidenberg, Verizon chairman and chief executive officer, in a written statement. "The acquisition will significantly enhance our customer service and competitive positioning by giving us a global reach, a suite of IP-based and value-added services, and a powerful, broad base of large-business and government customers."

The announcement comes just weeks after SBC announced a merger with AT&T.

Government customers are unlikely to see any changes for at least a year, as the SBC and Verizon deals work through the process of getting regulatory approval, said Warren Suss, president of Suss Consulting. Once they do, government buyers will have fewer choices, but the possibility that the post-merger companies will offer a broader range of services.

"It all depends on execution," he said. "Certainly there's potential for doing a better job."

The outcome will almost certainly be a boon for federal customers, he said.

"Mergers are somewhat chaotic, so there are some long term risks of merger-related issues having an impact, but I don't expect it," he added. "The fit between the companies is pretty good."

Verizon will pay $488 million in cash and $4.8 billion in stock for MCI. In addition, MCI will pay its shareholders a dividend worth almost $1.5 billion.

Both companies' boards of directors have approved the acquisition. Regulators and MCI shareholders still must approve the deal.