Sprint, WorldCom cancel merger

Telecom giants WorldCom and Sprint have cancelled their mega merger plans in the wake of regulatory opposition both in Europe and the US.

The decision to terminate the $130bn deal comes as little surprise after the US Justice Department sued to block the merger two weeks ago.

It feared the two companies would stifle competition in the long-distance market and raise prices for consumers. WorldCom is American's second largest telephone company while Sprint comes third.

The companies said changes to the deal requested by the Justice Department "would have eliminated the customer benefits and financial synergies that supported the proposed merger."

The European Commission also blocked the deal.

The Commission feared that the bulk of Europe's internet backbone would be controlled by just two US firms if the merger succeeded.

Decision welcomed

The US government welcomed the decision to cancel the merger.

"The merger would have led to higher prices, lower service quality and less innovation for millions of American consumers and businesses," said Joel Klein, an assistant attorney general who heads the Department of Justice's antitrust division.

"America's consumers and businesses will continue to reap the benefits of competition in the long distance, Internet backbone and data network services businesses."

WorldCom and Sprint said the Justice Department had informed them they would not be able to go to trial before January 2001.

Even if they won in court, the merger would still require approval from the US Federal Communications Commission and the European Commission.

Both companies decided the time to wait was too long given the growing competition in the telecommunications and internet business and called the merger off.

"Given the competitive nature of the marketplace, prolonged delay and uncertainty would not be in the best interest of our shareholders, employees or customers," Sprint said.

WorldCom chief executive Bernard Ebbers said the benefits of the merger were "clear and compelling."

And he criticised the US authorities for stopping the merger going ahead.

US government opposition to the plan "ultimately will reduce innovation and choice, and raise the cost of telephone services, for residential customers, particularly those in rural America," Mr Ebbers said.

Takeover targets

The two companies could now be potential takeover targets themselves for foreign predators eager to get into the huge US market.

Deutsche Telekom has reportedly been in talks with Sprint and Japan's NTT is also rumored to be interested in either company.

But the German company declined to comment on Thursday on whether it plans to make a bid or not.

"We are watching how the market develops, but we do not comment on what other companies are doing," spokesman Hans Ehnert said.

And Sprint said it was not for sale.

"We are not talking to anyone. We are not looking to talk to anybody," said Sprint chief executive William Esrey . "We are 100% energized and focused on our own independent strategy."