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Wednesday, 28 June, 2000, 07:54 GMT 08:54 UK
Dialling the wrong number

It was billed as the world's largest corporate merger when it was announced last year, but now the prosposed marriage of MCI WorldCom and its rival Sprint has gone the way so other many large telecoms deals have gone.

For example, Spain's Telefonica and the Netherlands' KNP's merger plans broke up when Telefonica shareholders balked at the idea of having partially-government owned KPN as a partner.

And Sweden's Telia's merger plans with Norway's Telenor broke down over disagreements about how the new company should be run.

Britain's BT has also failed to find a merger partner after its unsuccessful attempt to link up with MCI.

Competition stifled

Competition authorities are blocking the WorldCom and Sprint merger, fearing that it will stiffle competition within the telecommunications sector.

WorldCom and Sprint are the Number 2 and Number 3 US long-distance telephone companies respectively, and the US government is worried that the two companies already compete in the same areas and that US telecoms industry would be left with only two main competitors.

It is the first time the US government has blocked a deal in the rapidly consolidating US telecommunications market.

Washington is backed up by European Commission competition officials, who are afraid that the merger would spoil competition on the European internet market as well.

So what now for the two companies?

Both of them did not sound too despondent about not getting their merger approved yet, saying that the benefits were "too great to pass up."

There is a chance the two of them will submit revised proposals to both the US and European authorities, addressing their competition concerns.

But whether that will work is another question.

The US Justice Department is seeking a permanent injunction to prohibit the merger.

And European Commission Competition Comissioner Mario Monti said EU authorities might consider a revised proposal, but "only under exceptional circumstances."

Other potential partners

But if the merger does not go ahead as planned, other telecommunications companies may be interested in buying Sprint to get a slice of the lucrative US market.

Deutsche Telekom, which owns 10% of Sprint, is rumoured to be interested in buying all or part of the company to put it firmly on the international telecoms map.

Deutsche Telekom is eagerly trying to position itself as a global telecoms player with a 100bn euro war chest.

It was formerly in partnership with Sprint through their international joint venture Global One.

France Telecom and Japan's NTT have also been mentioned as potential investors in Sprint, which would also help secure their position as leading global telecommunications companies.

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See also:

27 Jun 00 | Business
Telecom merger 'blocked'
13 Jun 00 | Business
Sprint voices merger fears
21 Feb 00 | Business
EU probes $115bn telecoms merger
06 Oct 99 | The Company File
Telecoms firms in record $129bn merger
05 Oct 99 | The Company File
Driving the telecoms merger wave
11 Oct 99 | The Economy
Global telecoms revolution
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