The Verizon-MCI Merger


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BSTR259 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Mergers | Acquisitions | Strategic Alliances
Case Length : 19 Pages
Period : 2000-07
Pub Date : 2007
Teaching Note : Not Available
Organization : Verizon, MCI
Industry : Telecom and Broadband
Countries : US

Abstract:

The case discusses the merger of one of the largest telecom companies in the US, Verizon with MCI (formerly known as WorldCom). Verizon acquired MCI, mainly because of the synergies in operations and their complementary businesses. The decision for merger was also influenced by the prevailing scenario in the US telecom industry, which was witnessing consolidation. Verizon was finally able to acquire MCI in January 2006, though the merger process started in February 2005. At the same time, the merger of AT&T with SBC was also announced. Several consumer groups expressed their concern about these mergers as they were of the view that these mergers were a sign of duopoly in the US telecom market.

Verizon created a unit called Verizon Business, combining enterprise and government customers of MCI and similar operations of Verizon. Other businesses of MCI were integrated with corresponding businesses of Verizon. Though there were doubts raised by industry experts about the success of post-merger integration of both the companies, it went through without any major hiccups. Analysts were of the opinion that credit must go to Verizon for being well prepared for the merger and making it as 'merger of equals.' In the financial year 2006, operations of Verizon Business were spread over 150 countries and it generated revenues of US$ 20.5 billion.

Issues:

» Study the synergies of merger between Verizon and MCI

» Understand the reasons for the initial success of the merger

» Compare the two mergers of Verizon with MCI and that of AT&T with SBC

» Study the legal and regulatory conditions governing the mergers and acquisitions in the US telecom industry

» Analyze the trends in the telecom industry in the US

Contents:

  Page No.
Introduction 1
Background Note 2
Rationale for the Merger 5
The Merger Deal 6
Post Merger Integration 8
The Road Ahead 10
Exhibits 12

Keywords:

Verizon Communications, MCI Inc, US Telecom Industry, Industry Consolidation, Duopoly, Mergers and Acquisitions, WorldCom, Corporate Bankruptcy, Merger Integration, Merger Synergies, Complementary Businesses, Convergence, Federal Communications Commission, Antitrust Suit, American Antitrust Institute, Legal and Regulatory Environment, Qwest Communications International

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