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Friday, June 19, 1998 Published at 12:15 GMT 13:15 UK

Business: The Company File

Cable & Wireless drops MCI lawsuit

Cable and Wireless wants to buy MCI's wholesale Internet business

Cable & Wireless has dropped its breach of contract lawsuit against MCI Communications.

The British company agreed to buy MCI's wholesale Internet business for £385m ($625m) last month.

The deal was supposed to help clear the way for the mega-merger of MCI and another telecommunications group WorldCom.

However regulators are said to want more concessions to ensure that the combined force of MCI and WorldCom does not dominate the Internet.

Legal wrangles

Cable & Wireless, fearing it might wind up with nothing if MCI revised its plans and sought alternative buyers, filed a lawsuit earlier this month.

It wanted to protect its original agreement to purchase the wholesale Internet assets.

It said MCI was obliged to offer it first option to buy any revised package of assets that are sold.

But a federal judge last week rejected the firm's request to bar MCI from offering an expanded deal to any other company for 10 days.

MCI would however have to pay Cable & Wireless a termination fee of $25m if it breaks their existing agreement.

A source close to the joint talks said the current discussions between the two companies centred on Cable & Wireless possibly buying a bigger package of MCI's Internet assets.

Merger under scrutiny

The move by Cable & Wireless to drop the suit comes at a crucial time.

Competition regulators in the United States and Europe are currently reviewing the proposed merger of MCI and WorldCom.

Officials from 15 European Union member states are considering a draft decision to ban the proposed $37bn merger.

The European Commission has until July 15 to give its verdict.

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