July 22, 2005
Marianne Drost, Esq.
Senior Vice President, Deputy General
Counsel and Corporate Secretary
Verizon Communications Inc.
1095 Avenue of the Americas
New York, New York 10036
Re: Verizon Communications Inc.
Amendment No. 4 to Form S-4
Filed July 20, 2005
File No. 333-124008
MCI, Inc.
Form 10-K for the year ended December 31, 2004
Filed March 16, 2005
Form 10-Q for the quarter ended March 31, 2005
Filed May 9, 2005
File No. 001-10415
Dear Ms. Drost:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may raise additional
comments.
Form S-4
Prospectus Cover Page/Letter to Shareholders
1. We note your response to prior comment 2. Please revise the
fourth paragraph of the cover page to disclose the estimated range
of
any adjustment to the purchase price. Please also state that for
the
reasons described in the section you reference beginning on page
108,
a substantial downward adjustment could occur that is
substantially
greater than the estimated maximum of $0.60. Please include
similar
disclosure in the second question and answer on page iv and in the
merger consideration section of the summary on page 3.
Summary, page 1
Merger Consideration and Conversion of MCI Common Stock, page 3
2. We note your revisions in response to prior comment 4. For
additional clarity, revise the second sentence in the first
paragraph
to indicate that MCI will pay the special cash dividend and
Verizon
will pay the unpaid balance as merger consideration.
Material United States Federal Income Tax Considerations, page 12
3. Revise the first sentence under "Tax Consequences of
Alternative
Merger" to clearly state that the alternative merger would be
"fully
taxable."
The Merger, page 33
MCI`s Reasons for the Merger, page 62
4. We note the disclosure you have provided in response to prior
comment 15. Please enhance your disclosure in the fourteenth
bullet
point regarding the substance of Mr. Notebaert`s presentation.
For
example, briefly describe what Mr. Notebaert stated regarding
Qwest`s
wireless resale agreement with Sprint and Qwest`s view of customer
reaction to a combination of Qwest and MCI.
Analysis of MCI`s Financial Advisors, page 71
5. We note your revised disclosure on page 78 in response to prior
comment 16 regarding the industry multiple ranges. Explain
further
how the advisors derived the multiples from "customary valuation
techniques," and specify the valuation methodologies used.
Unaudited Pro Forma Condensed Combined Financial Statements
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Note 2. Purchase Price, supplemental disclosure dated July 20,
2005
6. Please refer to prior comment number 21. Immediately after
your
preliminary estimate of the purchase price on page 129, provide a
sensitivity analysis that gives effect to the range of the
possible
reductions in the cash dividend that will be paid by MCI and the
stock purchase price for MCI as a result of the potential downward
purchase price adjustment for specified liabilities and other
adjustments disclosed on page 108 and throughout the document.
7. Since the purchase price that you have reflected in your
schedule
on page 129 is contingent upon not having specified liabilities in
excess of $1.775 billion (and which does not appear to be
factually
supportable), tell us your consideration of using a purchase price
of
zero and adjusting upward for the lack of specified liabilities.
8. We note that rider A addresses some of the beliefs of MCI
regarding the downward price adjustment. Revise to disclose the
parties at MCI who have this belief. Does it include the board of
directors and management?
9. Since the decision regarding the downward price adjustment is
dependent upon both MCI`s estimate of specified liabilities and
Verizon`s estimate, revise to discuss in detail Verizon`s estimate
of
the specified liabilities and potential downward adjustment and
the
parties who have contributed to the calculation of Verizon`s
estimate.
10. Disclose in detail the methodology, including assumptions,
used
in the analysis that was performed by MCI to arrive at its
estimate
that the amount of specified liabilities is not expected to reduce
the purchase price by more than $0.60 per MCI share, including,
but
not limited to, MCI`s interpretation of the merger agreement and
governing law and its estimate of how a reasonable arbitrator
would
make a decision.
11. Disclose in detail how the interpretations of MCI and Verizon
regarding the merger agreement and governing law may differ and
the
efforts that have been made to date to eliminate these
uncertainties
regarding the downward price adjustment.
12. Disclose the following information:
* the amounts of specified liabilities, in dollars and euros,
presently included in the balance sheets of MCI at December 31,
2004
and March 31, 2005;
* the amounts of specified liabilities that have been paid by MCI
at
December 31, 2004 and March 31, 2005;
* the total amounts, in dollars and euros, of pre-petition
bankruptcy
claims that would be specified liabilities and are outstanding at
December 31, 2004 and March 31, 2005 and the amount that is
estimated
by MCI and Verizon to settle such claims, including an explanation
for the estimate of all claims that will be settled at less than
the
amount of the claim;
* an estimate of the amount of administrative expense claims filed
in
the bankruptcy cases and the methodology and assumptions used to
calculate the estimate;
* an estimate, in dollars and euros, of the amount of possible tax
claims that may be filed as described in (iii) on page 108 (our
understanding is that this would comprise international tax claims
and post-bankruptcy federal and state tax claims);
* the total amounts, in dollars and euros, of all income tax
liabilities as described in (iv) on page 108 and the amount that
is
estimated by MCI and Verizon to settle such liabilities, including
an
explanation for the estimate of all claims that will be settled at
less than the amount of the claim;
* the exchange rate to convert from dollars to euros that you used
to
estimate all dollar amounts for all claims, liabilities, etc.,
that
are denominated in euros; and
* MCI and Verizon`s rationale for the settlement of these claims
at
less than face value in light of this merger and the assumption of
liabilities by Verizon.
Note 5. Pro Forma Adjustments, page 132
13. Please refer to prior comment number 22. Expand your
disclosure
in (i) to provide the basis for your statement that the repurchase
of
the senior notes would likely have a favorable impact on the
unaudited pro forma condensed consolidated statements of income.
MCI draft Amendment No. 1 to Form 10-K for the year ended December
31, 2004
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note (20) Income Taxes, page F-60
14. Please refer to prior comment number 23. We are unable to
locate
the FAS 5 disclosure for the additional federal, state and foreign
tax contingencies and claims as disclosed on page F-61. As we
previously stated, we believe you should disclose unrecorded
exposures to contingent tax liabilities as required by FAS 5.
MCI draft Amendment No. 1 to Form 10-Q for the quarter ended March
31, 2005
15. Revise, as applicable, for comments issued regarding Form 10-K
for the year ended December 31, 2004.
* * * *
Please amend your Form S-4 and have MCI amend its Form 10-K
and
Form 10-Q in response to these comments. You may wish to provide
us
with marked copies of the amendments to expedite our review.
Please
furnish a cover letter with your amendments that keys your
responses
to our comments and provides any requested supplemental
information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendments and responses to our comments.
You may contact Sharon Virga, Senior Staff Accountant, at
(202)
551-3385 or Dean Suehiro, Senior Staff Accountant at (202) 551-
3384
if you have questions regarding comments on the financial
statements
and related matters. Please contact Albert Pappas, Senior Staff
Attorney, at (202) 551-3378 or me at (202) 551-3810 with any other
questions.
Sincerely,
Michele M. Anderson
Legal Branch Chief
cc: William Regner, Esq.
Debevoise & Plimpton LLP
(212) 909-6836 (fax)
Nicole A. Perez, Esq.
Debevoise & Plimpton LLP
(212) 521-7564 (fax)
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Marianne Drost, Esq.
Verizon Communications Inc.
July 22, 2005
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