Monday’s news that MCI would recommend acceptance of Verizon’s US $8.45n bid instead of an earlier offer of US$9.75bn from rival Qwest might have been foretold by those who follow share prices.

Both Qwest and Verizon are included in the Redux Global ICT 100 Index (R-100). MCI alas was not included, on the reasonable grounds that it was in Chapter 11 at the time that the R-100 was drawn up, with many of its former senior officers facing indictments for wrongdoing (some of whom have since been found guilty and await sentencing of up to 85 years).

The whole farrago was set in motion by this January’s takeover of AT&T by SBC. In our eyes, AT&T was clearly a lame duck at least as long ago as October 2004 (click here for the full poop). No sooner had the second largest of ‘Ma Bell’s’ surviving ‘Babies’ played the Oedipus card (click here) with a US$16bn takeover of AT&T, than the ugliest ducking of all became a very fine swan indeed (click here for details of the transformation).

Rollercoasters
Post-Chapter 11 MCI emerged at the beginning of 2004 at around US$25 per share. By May of the year of its return it had fallen to just above US$12.51; at the turn of the year it stood at under US$20. On the back of the vying interests of Qwest and Verizon, it peaked at US$27 per share last week before declining to just over US$25 yesterday.

The oscillations of Qwest and Verizon are more fascinating, not least because of the contrast between the mighty midget Qwest’s market capitalisation (US$8bn) and that of Verizon, the largest ‘Baby Bell’ (US$95bn) at the beginning of 2005.

Qwest spiked at US$5 per share after its lemming-like bid for MCI in February. It has tumbled down slowly as the cost to the company of such a takeover has sunk in; on Monday it was trading at under US$3.5. A case of damned if they did and damned because they didn’t.

Over at Verizon, the MCI dalliance was little more than an irritant of the ‘tick bird’ variety. In truth, Verizon’s performance on the bourse is more contingent on its core mobile and broadband businesses than any acquisition of the the tumbledown house that Ebbers built. Verizon began the year at around US$41 per share, having already begun a decline from last year’s 4Q peak somewhere north of US$42.It’s price has spiked since February whenever it has gained the ascendancy with regard to MCI, but has tellingly dropped back whenever such ascendancy appears to be confirmed. On Monday and Tuesday of this week, Verizon shares dropped by a combined 3% for more or less that reason to stand at US$34.6 apiece.

Early movers?
So what of the pair who started all this knee-jerk corporate line dancing? Well, SBC traded at US$25.77 at the year’s commencement US$23.8 today. Like Verizon’s experience, there’s a large measure of ‘who cares?’ evident here. AT&T is hovering around the US$19 mark, fractionally down on the valuation agreed by SBC back in January  and not so different from its price at the start of the year.

The comparative lack of volatility in SBC-AT&T, as compared to the menage of MCI-Qwest-Verizon, may be a sound indicator of where the next batch of troubles lie. MCI's remaining shareholders, many of them fiscal hawks, may yet have the final say.
Jim Chalmers