Monday July 15, 1:14 am Eastern Time
FCC, Faced With Telecom Crisis, Could Let a Bell Buy WorldCom
biz.yahoo.com
WASHINGTON -- Declaring the telecommunications industry in a state of "utter crisis," the chairman of the Federal Communications Commission suggested his agency could allow a Baby Bell to take over WorldCom Inc. (NasdaqNM: WCOM - News) , a combination once seen as unthinkable, Monday's Wall Street Journal reported.
A merger of a large regional phone carrier and the nation's second-largest long-distance company would reverse the FCC's position on such deals. It could also revive the spirit of AT&T's monopoly before the 1984 court-ordered breakup that created the regional Baby Bells, by allowing one company to control huge swaths of both markets.
But in his first public comments on the unfolding WorldCom scandal, FCC Chairman Michael Powell said the industry's battered, debt-ridden condition now leaves regulators little choice but to consider such options, especially if the alternatives would disrupt phone and data service to WorldCom's 20 million customers. To keep WorldCom's operations stable, he also called for the government to continue its billions of dollars in federal contracts with the company, rather than pull back as some White House officials have suggested.
Mr. Powell cautioned that a Bell's bid for WorldCom would still be far from certain to win regulatory approval. But one remedy for the broader industry's ills, he said, could be major consolidations along the lines the defense industry went through in the 1990s.
"There are plenty of doctrines in antitrust and competition policy that would take into consideration the duress and state of the market," said Mr. Powell, who in the Clinton administration was a top official of the Justice Department's antitrust division. "If a Bell company brought a deal to us, that would certainly be part of the consideration."
Just five years ago, then-FCC Chairman Reed Hundt helped sink a potential $50 billion merger between the Baby Bell SBC Communications (NYSE: SBC - News) Inc. and AT&T Corp. (NYSE: T - News) -- still the leading long-distance carrier -- by publicly labeling such a combination "unthinkable" because of its size.
A deal between a Bell and WorldCom also could lead to further consolidation as the other Bells scrambled to acquire AT&T and Sprint Corp. (NYSE: FON - News) as a way of keeping pace. Mr. Powell, however, suggested that Bells probably would have trouble affording such acquisitions.
Damage to the telecommunications sector, the FCC chairman said, extends far beyond ailing companies such as WorldCom, Global Crossing Ltd. (GX - News) and Qwest Communications International Inc. Even relatively stable companies such as Verizon Communications (NYSE: VZ - News) Inc. and SBC face huge challenges now that lenders are extremely hostile to telecom companies.
Wall Street Journal Staff Reporter Yochi J. Dreazen contributed to this report. |
