Sprint, WorldCom Call Off Merger


Thursday, July 13th 2000, 12:00 am
By: News On 6


NEW YORK (AP) — WorldCom and Sprint agreed Thursday to call off their planned $129 billion telecommunications merger in the face of extreme opposition from regulators in the United States and Europe.

In a statement, the companies said that ``the set of conditions ultimately demanded by the U.S. Department of Justice would compromise the customer and financial benefits of the merger.''

Late last month, Attorney General Janet Reno announced the Justice Department was suing to block the deal. WorldCom and Sprint then pulled their merger application in Europe, although it too was ultimately rejected.

The Justice Department contended that the merger of the second- and third-largest U.S. long-distance carriers would leave millions of Americans paying more for less service.

Mario Monti, competition commissioner for the European commission, had said the merged company would sharply reduce competition for Internet connections.

Both companies had been widely expected to drop their merger proposal, and in fact had been hinting at it for the past several days.

At a wireless communications conference Tuesday in New Orleans, WorldCom president and chief executive Bernard Ebbers was asked if he had anything to report on the merger and whether it was still moving forward.

``No,'' Ebbers said. ``I don't think there is much left to discuss.''

Sprint called the failed deal ``an exceptional opportunity to create a broad-based international competitor.''

``While we disagree with the conclusions reached by the Justice Department on the competitive impact of the merger, litigation of those conclusions in federal court is not a realistic alternative,'' the Westwood, Kan.-based company said.

Both Sprint and the Clinton, Miss.-based WorldCom said the Department of Justice had informed them it would not be able to go to trial before January 2001. Even if the companies were successful in that trial, approval by the Federal Communications Commission and the European Commission would still be needed — and that delay was too much.

``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.

In a separate statement, WorldCom's Ebbers reiterated a criticism he made Tuesday that the government — in particular the FCC, led by William Kennard, and the Department of Justice antitrust division, headed by Joel Klein — was unnecessarily interfering in the marketplace.

``The benefits of this merger were clear and compelling. Opposition to this merger just adds to the list of Kennard-Klein policies that ultimately will reduce innovation and choice, and raise the cost of telephone services, for residential customers, particularly those in rural America.''

The decision to call off the merger frees up both companies to pursue other merger opportunities. One possible partner: Deutsche Telekom AG, which has been rumored to be eyeing both WorldCom and Sprint as possible targets.

Deutsche Telekom declined to comment on the news. ``We are watching how the market develops, but we do not comment on what other companies are doing,'' spokesman Hans Ehnert said.

Shares of both companies have fluctuated wildly over the past several days as speculation about their fate unfolded. On Wednesday, Sprint fell 50 cents to $47.50 on the New York Stock Exchange after trading in the $60 range for much of last month. Shares of WorldCom rose 6.25 cents to $44.50, after trading as low as $37.25 three weeks ago.

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On the Net:

WorldCom: http://www.wcom.com

Sprint: http://www.sprint.com

WorldCom-Sprint merger: http://www.worldcom-merger.com