Fitch: MCI on watch positive, Verizon on watch

Fitch Ratings said it placed the A+ rating on Verizon Global Funding's outstanding long-term debt securities on Rating Watch Negative and the B senior unsecured debt rating of MCI Inc. on Rating Watch Positive following the announcement that Verizon Communications will acquire MCI for $4.8 billion in common stock and $488 million in cash.

Affected Verizon subsidiaries include GTE Corp., NYNEX Corp., Verizon New York, Verizon Credit Corp., Verizon Florida, Verizon New England, Verizon South, GTE Southwest, Verizon California, Verizon Delaware, Verizon Maryland, Verizon New Jersey, Verizon North, Verizon Northwest, Verizon Pennsylvania, Verizon Virginia, Verizon Washington D.C. and Verizon West Virginia.

Fitch said the rating action reflects the need to evaluate the moderately higher business risk profile of Verizon following its acquisition of MCI, the potential synergies to be achieved, the outcome of the regulatory approval process and the potential for other bids to arise for MCI.

Business risk elements surrounding the transaction include the weak fundamentals of the long distance industry, the risk that anticipated synergies are materially less than originally contemplated and the impact of the integration costs on the combined companies' cash flow, according to Fitch.

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