Will Sprint's Esrey Be a Keeper for Ebbers?
The acquired CEO says he'll stay put as WorldCom's new
chairman. Check back in 12 months
Business Week
October 12, 1999
It's standard operating procedure for Bernard J.
Ebbers, the CEO of MCI WorldCom Inc., whenever
there's an acquisition. Typically, Ebbers installs the
CEO of the company he buys as chairman of
WorldCom. But Ebbers retains the CEO title -- and all
the power. Then later, typically about a year after the
acquisition is complete, the CEO of the acquired
company leaves WorldCom to pursue other interests.
Indeed, a long list of distinguished alums have departed
from the WorldCom chairman post. For example,
James Q. Crowe, now CEO of Level 3
Communications, briefly held the title after Ebbers
bought Crowe's MFS Communications.
Now, Ebbers is making the biggest acquisition ever,
the $129 billion purchase of Sprint Corp., and new
MCI WorldCom Chairman William T. Esrey is playing
the role of acquired CEO. But Esrey says his
chairmanship won't be a short-term position. "Bernie
and I have agreed on what our responsibilities will be,"
he said during an interview at Telecom 99, an huge
industry trade show in Geneva. Esrey says he can't yet
spell out those responsibilities because they'll affect
other people at the merged companies, and some of
those people haven't yet been informed about the
changes. But he says he won't be just a figurehead.
Asked whether he would expect to be at the company
a year from now, Esrey replied, "Absolutely."
SEEKING APPROVAL. Indeed, he'll have plenty of work
to do at MCI WorldCom and Sprint. First off, the two
companies will have to convince the Federal
Communications Commission to approve the deal.
FCC Chairman William Kennard already has declared
that the two companies will face a heavy burden of
proof that the merger will be good for consumers.
Esrey, who as head of the third-largest long-distance
company aggressively led price cuts in the industry, is
already working up an argument for why the deal is
good for competition. He says that MCI-Sprint merger
will give the new combo enough investment clout to
break the Baby Bells' monopolies on local service.
Sprint has had a hard time pushing into the $100 billion
local-phone market because it's so expensive to build
local connections to businesses and consumers, Esrey
says. With MCI WorldCom, which already has local
facilities that primarily serve businesses, that task will
be easier.
If regulators approve the deal, the two companies
would fit together well. WorldCom gives Sprint a
stronger presence in local markets, and a much
stronger international presence, now that the Global
One partnership with Sprint is dissolving (see BW
Online, 10/11/99, "Are Global One's Days
Numbered?"). And Sprint gives WorldCom a
fast-growing wireless business as well as budding
technology for local service. "We complement each
other perfectly," Esrey says.
That's the two businesses, of course. Whether the two
CEOs can work well together remains to be seen.
By Peter Elstrom in Geneva
EDITED BY DOUGLAS HARBRECHT
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