With merger called off, WorldCom, Sprint may be heading down similar paths

JACKSON, Miss. - In choosing to go separate ways rather than merging, WorldCom Inc. and Sprint Corp. may be heading down very similar paths.

WorldCom is expected to seek a new wireless partner and Sprint insists it's not for sale, but the $129 billion corporate marriage that they called off Thursday leaves both as potential takeover targets.

The companies said the deal - which would have combined the second- and third-largest U.S. long-distance carriers - was torpedoed by government opposition in the United States and Europe. The same regulatory obstacles might be avoidable with other partners, they said.

The main objections were that the merger would combine two leading players in long-distance calling and ownership of the major network ''backbones'' that carry Internet traffic, hurting competition in both markets.

WorldCom chief executive Bernie Ebbers and Sprint CEO William T. Esrey said it would take too long to fight a U.S. Department of Justice lawsuit seeking to block the merger. The merger also was opposed by the European Commission.

''Regulators didn't understand it, or didn't want to understand it,'' he said.

Ebbers complained that ''opposition to this merger just adds to the list of (U.S.) policies that will ultimately reduce innovation and choice, and raise the cost of communications services for residential customers, particularly those in rural America.''

But Joel Klein, an assistant attorney general who heads the Justice Department's antitrust division, said the companies made the right decision.

''The merger would have led to higher prices, lower service quality and less innovation for millions of American consumers and businesses,'' Klein said. ''America's consumers and businesses will continue to reap the benefits of competition.''

Either way, abandoning the merger leaves both companies free to pursue new partnerships or entertain buyouts.

Alex Winogradoff, an analyst with Dataquest's Telecommunications and Networking group in Stamford, Conn., predicted Sprint would be in a new deal within the next year.

''Competitors, potential suitors and corporate raiders are already hard at work,'' he said.

But Esrey insisted that Sprint is not for sale. ''We are not talking to anyone. We are not looking to talk to anybody. We are 100 percent ... focused on our own independent strategy,'' he said.

Scott Cleland, of Legg Mason Precursor Group in Washington, D.C., said a number of foreign companies, including Deutsche Telekom, France Telecom and Nippon Telephone & Telegraph, are cash rich and eager to establish a U.S. presence.

Both Sprint and WorldCom could fulfill that need, he said.

Deutsche Telekom, majority-owned by the German government, already faces opposition from lawmakers on Capitol Hill who say a U.S. acquisition by that company would violate federal law.

Communications law prohibits the FCC from approving acquisitions by telecommunications companies in which a foreign government has more than 25 percent ownership. But the commission can waive that limit if it determines the deal is in the public interest.

Deutsche Telekom declined comment on whether it plans to pursue either company.


On the Net:

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

WorldCom: http://www.wcom.com

Sprint: http://www.sprint.com


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