30 SEnators send FCC Chairman letter opposing Deutsch Telecom's acquisition of Sprint.
JohnG
totaltele.com
WorldCom and Sprint seek
guidelines as deal unwinds
By Jessica Hall, Reuters
06 July 2000
Long-distance telephone companies WorldCom Inc. and Sprint Corp.
will likely abandon their $120 billion merger agreement next week
once they clarify how federal regulators' objections to the deal would
affect any future mergers, sources familiar with the situation said.
The Justice Department, in its largest merger challenge ever, last
week sued to block the deal, saying the combination of the No. 2 and
No. 3 U.S. long-distance telephone companies would hobble
competition in the Internet and long-distance telephone markets.
The DOJ filed a 65-page lawsuit mapping out its objections to the
deal. The companies have been in talks with regulators to better
understand the agency's arguments and to learn whether the
objections set standards that would prevent other telecom mergers or
alliances in the future, sources said.
"From a public policy perspective, the Department of Justice - while it
appears decisive - really instituted a lot of gray areas for a lot of
companies about what's going to be allowed next," said one source
who declined to be named.
The companies want the DOJ to clarify the conditions the government
might consider for future telecommunications deals, sources said.
Could a Baby Bell, for example, ever merge with WorldCom or Sprint?
Would two long-distance carriers be allowed to merge once more
Baby Bells enter the long-distance market?
"The last thing you want to do is go through this again. That means
really taking a step back and getting clear on what the rules really
mean," the source said.
WorldCom and Sprint declined to comment. The Department of
Justice could not be immediately reached for comment.
While the companies were expected to cancel the deal as early as this
week, it will likely be several more days before the companies
conclude their discussions with regulators and unwind their complex
merger agreement, sources said.
"It took a long time to create this deal and it's going to take more than
a few days to unravel it," a second source said.
Once divorced from WorldCom, Sprint would be an attractive takeover
target for Deutsche Telekom AG or one-time suitor BellSouth Corp. ,
analysts said.
Media reports have suggested that Deutsche Telekom AG and Sprint
already have held preliminary merger talks, but industry sources told
Reuters that such reports were overblown. The German company has
merely expressed its interest in Sprint, sources said.
Under the merger pact with WorldCom, Sprint can't talk to any
interested party before the merger agreement is officially nullified.
Sprint would have to pay WorldCom a $2.5 billion break-up fee if it
violated that so-called "no shop" agreement.
An actual bid for Sprint remains unclear since Deutsche Telekom
would face intense regulatory scrutiny.
A group of 30 U.S. senators sent a letter to Federal Communications
Commission Chairman William Kennard last week saying they
opposed Deutsche Telekom acquiring Sprint or another U.S. telecom
operator.
Deutsche Telekom, which has a warchest of more than 100 billion
Euros, is also rumoured to be interested in Qwest Communications
International Inc. and Britain's Cable & Wireless Plc.
However, sources said the German company will proceed cautiously
with any potential bid since it has been burned by failed attempts in
the past, such as its unsuccessful takeover of Telecom Italia SpA .
Deutsche Telekom is also unlikely to make any major moves until
mid-July, when the "quiet period" following its recent share offering
expires, a source familiar with the situation said.
Qwest on Wednesday remained coy about any potential deal with
Deustche Telekom.
"This industry will continue to consolidate. Whether we're in
somebody's plans or not, I just can't comment," Qwest Chairman Joe
Nacchio told cable television network CNBC.
"I think we're in a great position where we could go either way (either
being a target or an acquirer)," Nacchio said.
Deutsche Telekom ended merger talks with Qwest earlier this year
after Qwest's existing merger partner, U S West Inc., objected.
BellSouth, meanwhile, will remain on the sidelines until it sees whether
deep-pocketed Deutsche Telekom will pursue Sprint or Qwest,
sources familiar with the situation said.
"BellSouth is waiting to see what Deutsche Telekom does - they are
the 500-pound gorilla and it's not worth getting into a bidding war with
them," one source said.
A potential purchase of Sprint by BellSouth has its drawbacks.
BellSouth would likely be forced to divest its wireless telephone
properties if it bought Sprint, and Sprint's national wireless network,
sources said.
Qwest also is less attractive to BellSouth because of Qwest's recent
acquisition of U S West Inc., sources said. BellSouth owns a minority
stake in Qwest.
© 1999 Reuters Limited. All rights reserved.
Related News Stories
Rumorwatch: Deutsche
Telekom to buy C&W
EU says global merger rules
must be better aligned
Deutsche Telekom hit by
Senate concern
EC would probe a Telekom bid
for Sprint
WorldCom aims to rent
wireless spectrum
AT&T and WorldCom ponder
consumer long distance futures
Bandwidth prices still falling,
say Concert execs
EC kills WorldCom's merger
dream
Business-to-Business in EC
regulator's sights
Related Features
Fired-up 3G backers set to
force WRC spectrum clash
Market Strategies: Bandwidth
prices set to tumble as BT
exploits Asian fiber frenzy
Bell Atlantic ruling opens door
to long distance
Profile: C&W's man for all
continents
Profile: Global Bob's world
ambitions
The Business: Business in
Brief
Bottom Line: Marry in haste
and repent at leisure?
Access - it's all the rage
France Telecom readies bid for
Global One |
