WorldCom-Sprint merger under threat

Mr Ebbers could be looking worried

One of the biggest telecoms mergers in history may be blocked by US regulators.

The $130bn deal by MCI Worldcom to purchase its US rival Sprint, announced in October, is under investigation by the US Justice Department.

Newspaper reports suggest that the American authorities have concluded that the merger would be anti-competitive, and stifle long distance and internet traffic.

The new company would control much of the world's network which carries the internet.

In addition, it would become the largest long-distance carrier in the United States, and become a major player in mobile phones with one of the few nationwide networks in America.

Reports suggest that US officials are now planning to meet with Worldcom's boss Bernard Ebbers to discuss the deal.

What to sell?

The Justice Department could insist that Worldcom divest itself of key properties in order to avoid being sued for anti-trust violations.

WorldCom has already said it will sell Sprint's internet business.

But the US authorities could ask for a sale of Worldcom's own internet business UUNet Technologies.

Mr Ebbers has said he will never sell that business, which is considered WorldCom's most profitable sector with $3.5bn in revenues.

WorldCom has already been in difficulty with the regulators over an internet sale before.

In 1998 it was ordered to sell MCI's internet business to Cable and Wireless as part of an earlier merger.

But Cable and Wireless said the company moved so slowly to transfer customers and employees that it lost much of the business.

Worldcom has subsequently agreed to pay Cable and Wireless $200m compensation.

New climate

The Justice Department has still to make a final decision on the recommendations of its investigators.

But its success against Microsoft may have encouraged the head of the anti-trust division, Joel Klein, to proceed more aggressively against other big, high-tech companies.

The long-distance business could also be a target for US regulators, as between them AT&T and Worldcom-Sprint would have 80% of the US market.

Worldcom says that the market is now opening up, with local Bell companies entering into long-distance business.

Meanwhile the deal also faces a threat from the European Commission, which is reviving the merger and will make a decision by 12 July.

The EU is worried that after the merger the bulk of Europe's internet backbone would be controlled by just two American companies.

European labour unions representing communications workers have urged Brussels to block the deal.

The Worldcom internet network is three times larger than its nearest rival, and makes up half of the existing market.