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July 15, 1998
C&W to Buy MCI Internet Assets,
Easing Way for WorldCom Deal
By JARED SANDBERG and STEPHANIE N. MEHTA
Staff Reporters of THE WALL STREET JOURNAL
NEW YORK -- MCI Communications Corp. has reached a pact to sell its
Internet assets to Cable & Wireless PLC of London for roughly $1.6
billion in cash, a move that could at last win approval for the
contentious $37 billion merger between MCI and WorldCom Inc., people
familiar with the talks said.
MCI is expected to announce as early as the close of the stock markets
Wednesday that it is selling all its Internet assets to the British
telecommunications company. The companies had forged an agreement in May
that called for MCI to sell only its wholesale Internet business to C&W
for $625 million in cash. But European regulators, who have taken a hard
line on the merger, opposed that sale on the grounds that it didn't
include enough -- specifically, MCI's corporate and consumer customers,
which the Washington-based company planned to keep.
Company Profile: MCI Communications
Company Profile: WorldCom
In an effort to win approval for its WorldCom merger, MCI finally
relented and indicated it would expand its asset sale. Based upon this,
European regulators last week conditionally cleared the MCI-WorldCom
merger, and U.S. Justice Department officials began soliciting comments
from other telecommunications companies to determine whether the new
terms of the asset sale satisfy rivals' concerns, an executive familiar
with the talks said. The executive added that such "market testing"
could be concluded as early as Wednesday.
MCI and WorldCom declined to comment on the proposed C&W pact. "We look
forward to the Justice Department's decision, and we expect to announce
a buyer soon," an MCI spokesman said. The companies have said they
expect to close the merger by the end of the summer. The Justice
Department declined to comment Tuesday.
The planned megamerger of WorldCom and MCI has provoked bitterness from
the start. Rivals contended that the transaction would give the
combination overwhelming control of the major data "backbone" of the
Internet. Regulators soon fell in line with this view, forcing MCI and
WorldCom, which has extensive Internet assets of its own, to divest
themselves of some of their overlapping businesses.
Under the terms of the proposed sale to C&W, MCI-WorldCom wouldn't be
permitted to attempt to win back C&W's Internet customers for 18 months,
satisfying one of rivals' main sticking points, an executive close to
the talks said.
The proposed sale would give C&W a greater foothold in the fast-growing
U.S. data market. It also would open the door to partnerships and joint
ventures with large U.S. carriers looking to tap into its vast
Internet-transmission capabilities.
But MCI's Internet assets almost slipped out of C&W's grasp. When it
became clear that regulators didn't like the original terms of the deal,
C&W feared that MCI would look for a new buyer and sued MCI to make sure
that C&W would get first crack at a broader asset sale.
Indeed, people close to MCI and WorldCom say that rival Williams Cos., a
Tulsa, Okla., wholesaler of long-distance transmission services, at one
point emerged as the preferred buyer for the Internet assets. "It turned
out to be a lot easier to continue with C&W," one executive said.
In Nasdaq Stock Market trading Tuesday, MCI shares rose $2.3125 to
$64.3125. |
