January 6, 2006 10:57 AM PST

Verizon closes book on MCI merger

Verizon Communications closed its $8.44 billion acquisition of long-distance carrier MCI on Friday.

MCI's CEO Michael Capellas, who led the company out of bankruptcy protection in 2004, will leave the company, as planned, now that the merger is complete, Verizon said in a statement. Capellas is expected to get a severance package of almost $40 million.

Verizon received its final approval from regulators in Washington state late last month. The deal got the final federal stamp of approval back in October.

MCI became the target of an intense bidding war between Verizon and Qwest Communications after Verizon announced its intent on Feb. 14, 2005 to buy the company for $6.7 billion. But in the end Verizon won the prize, despite sharp criticism from certain MCI investors.

The acquisition of MCI gives Verizon an international long-distance network and several large corporate customers. A new division called Verizon Business has been created to house the new network assets. Verizon Business will combine Verizon's existing corporate and government customers with MCI's customers.

"This milestone for Verizon creates a new competitive force with the power of the global MCI network and the reach of Verizon's broadband and wireless networks in the U.S.," Verizon Chairman and CEO Ivan Seidenberg said in a statement. "Our added network capabilities and strong customer relationships provide a solid foundation for innovative and integrated wireless, wireline and multimedia services designed to meet customer demands for speed, mobility and control."

The deal comes on the heels of SBC Communications' completion of its $16.9 billion acquisition of AT&T. The combined company is now called AT&T. The conclusion of the two mega-mergers ends the traditional long-distance phone market that was created after the divestiture of AT&T back in 1984.

Over the past few years, the United States telecommunications market has consolidated to create a kind of company that provides a full suite of communications services such as local, long-distance and wireless calling, in addition to high-speed Internet access and television programming.

The advent of Internet Protocol technologies has changed the landscape of the industry as phone companies such as Verizon and AT&T now face stiff competition from cable operators that are also offering voice calling, high-speed Internet access and TV service.

 

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