Kagan on Possible BellSouth Bid for Sprint: Analyst Comment
Atlanta, Oct. 1 (Bloomberg) -- Jeffrey Kagan, an independent telecommunications analyst based in Atlanta,
comments on a possible BellSouth Corp. bid for No. 3 U.S. long-distance carrier Sprint Corp. Business Week
Online reported that BellSouth, which sells local phone service in nine southeastern states, is considering a
bid for all or part of Sprint. MCI WorldCom Inc., the No. 2 U.S. long-distance carrier, is discussing a
merger with Sprint that would give MCI WorldCom the national wireless network operated by Sprint PCS,
a person familiar with the negotiations said last Friday. MCI WorldCom needs wireless to offer customers
a full bundle of telecommunications services.
``After the dust settles of a merger with either company, (Sprint Chairman and Chief Executive William)
Esrey is not going to share the captain's chair with anybody, and he's not going to take the No. 2 spot.'
``A BellSouth-Sprint combination would be enormously helpful for BellSouth's future. A, It increases their
girth; B, It gives them a national wireless network; C, It gives them a national data network;, D, It gives
them loads of long-distance customers right out of the gate, and they can be in the long-distance business
outside of their region right now. It would be exactly what the doctor ordered for BellSouth.'
``For MCI (WorldCom), it could fill in a couple holes. For BellSouth, it would transform the whole company
overnight.'
``For the same reason it makes perfect sense for BellSouth to invest in Qwest (Communications
International Inc., the No. 4 U.S. long-distance carrier), to have access to the nationwide network that
they're building, Sprint would give (BellSouth) customers and revenue and history. Sprint is a lot like
BellSouth -- very conservative. Sprint employees would really feel more at home, I think, in a BellSouth
atmosphere than in the really rough- and-tumble, cut-to-the-bone MCI WorldCom culture.'
``BellSouth is just an investor in Qwest, so I don't think anything has to happen (with BellSouth's 10
percent stake). . . The question is, would they need a Qwest if they've got a Sprint?'
``Clearly, we've been waiting for Sprint to go up on the block for years -- not a question of if, just a
question of when. Esrey's done a great job of making the company very attractive. Sprint would be a
crown jewel in anybody's cap. MCI WorldCom needs the wireless component, BellSouth needs the
nationwide data component.'
``If BellSouth can scoop up all of Sprint, that would be the best move for them, because Sprint is a
well-rounded company, has all of the pieces. . . if they were just have to pick up the table scraps after MCI
WorldCom had to divest (some pieces), I don't know if it would be as valuable.'
``I don't think Esrey would've been happy just getting one offer. He wants to play them off against each
other and squeeze as much value out of the deals for the shareholders as he can, and you can only do that
by having a bidding war.'
``I don't think Esrey is so worried about the culture as maximizing value of the shares.'
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