Telecom takeover battles on wall street

News about the continuing U.S. telecommunications sector merger saga, and a budding takeover battle in the Chinese online arena grabbed the attention of investors this week.

In the telecom arena, Qwest Communications International made a new bid for MCI in an effort to snatch it away from Verizon Communications. The new offer counters the deal, announced Feb. 14, for Verizon to buy MCI for US$6.7 billion.

MCI (MCIP) shares have ridden the turbulence in the sector to a new 52-week high, closing Thursday at US$23.21, up 24.4 percent for the month.

The new Qwest offer is for the same amount that it had tendered earlier, about US$8 billion, but this time the company is saying that it will guarantee the price. The acquisition mechanism announced by Qwest would allow for a faster payout to MCI shareholders than the Verizon deal.

MCI had rejected Qwest's earlier offer, after which Qwest publicized the fact that its bid was higher than Verizon's. MCI officials then had to explain publicly that Verizon is larger and more profitable than Verizon and thus a better fit. MCI said it would study the new Qwest offer.

The jockeying for position in the telecom world follows SBC Communications' January announcement that it will acquire AT&T. The deal paved the way for further industry consolidation as carriers scramble to fight the new telecom giant.

After the SBC announcement, the value of Qwest shares neared its 52-week high of US$5.00, then plunged below US$4.00 after the Verizon-MCI deal was announced. But since announcing that it intended to rebid, Qwest (Q) shares have moved back to the US$4.00 range. Verizon (V) shares have inched down, closing Thursday at US$35.50, 1.71 percent lower than its closing price one week earlier, when Qwest announced its intention to rebid.

Investor interest has also been piqued by a corporate takeover tussle in China. The efforts of Shanda Interactive Entertainment, China's biggest online-game company, to acquire Internet media company Sina has boosted the value of Sina on the Nasdaq exchange.

On Feb 18, Shanda announced that, together with related companies, it had paid US$230 million for a 19.5 percent stake in Sina. Sina (SINA) shares jumped by US$2.82, to US$28.42, on the news. Though Sina Tuesday announced a shareholder rights plan, otherwise known as a 'poison pill,' to ward off a takeover, the move did not dim Sina's star significantly, as shares in the company continued to trade in the US$27 range. Continued interest in the company is likely due to the fact that a merged Sina and Shanda would be the largest company in the competitive Chinese Internet market.

Telecom manufacturers, meanwhile, see continued price pressure. Ciena shares lost US$0.35 Wednesday, sliding to US$2.40, after the company said it does not expect its second fiscal quarter to be better than its first. Part of the problem, the company said, is that although its optical transport business has made some gains, margins on the equipment are low. It forecasts a second quarter loss of US$0.05 to US$0.07.

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