FOCUS-MCI WorldCom, Nextel end merger talks-sources
(adds value of potential deal paras 1,4, updates stock prices, para 9-10, analyst comment para 11)
By Jessica Hall
NEW YORK, May 5 (Reuters) - MCI WorldCom Inc.(WCOM - news) has ended talks to buy wireless phone company Nextel Communications Inc. (NXTL - news) after the two companies failed to agree on terms of a deal that had been pegged at about $13 billion, sources familiar with the situation said on Wednesday.
MCI WorldCom, the No. 2 U.S. long-distance company, had been in talks for several weeks to acquire Nextel, sources said. The companies met last weekend, but were unable to agree on a price and have since ended discussions on a possible deal, they said.
MCI WorldCom and Nextel declined to comment.
Industry analysts had speculated MCI WorldCom would have been willing to pay up to $45 a share for Nextel, or a total $13.1 billion.
One sticking point in the talks on the possible all-stock deal was whether the agreement would include a so-called ''collar,'' or protection against a decline in price of MCI WorldCom's stock. MCI WorldCom did not want to include that provision, one source said.
MCI WorldCom, which lacks a wireless business, might look elsewhere for a wireless acquisition, but talks with Nextel are unlikely to be revived any time soon, sources said.
Nextel, the last independent U.S. wireless phone company with a national network, would have allowed MCI WorldCom to enter the wireless business and offer more complete packages of phone, data and Internet services.
An acquisition of money-losing Nextel would have damped MCI WorldCom's profits by about 25 percent, analysts said.
MCI WorldCom's stock, which had been pressured recently by news of the Nextel talks, rose sharply Wednesday as investors expressed relief the company would not pursue the dilutive deal. The shares gained $6.69 each to $89.625 on Nasdaq.
Nextel stock lost $1.19 a share to $35.875 on Nasdaq.
''There are lots of options for MCI WorldCom to get into wireless domestically, but there aren't many options for Nextel to sell itself,'' said Kevin Roe, analyst at ABN Amro.
The Nextel talks mark the second time MCI WorldCom has walked away from a wireless acquisition.
Jackson, Miss.-based MCI WorldCom in January briefly considered entering the bidding for San Francisco-based wireless company AirTouch Communications Inc. (ATI - news) but decided against submitting a formal offer.
Britain's Vodafone Group Plc (quote from Yahoo! UK & Ireland: VOD.L) eventually won AirTouch's hand, beating out rival suitor Bell Atlantic Corp.(BEL - news)
MCI WorldCom lacks a wireless business at a time when an increasing amount of phone calls, or minutes-of-use, are being made on wireless phones instead of traditional phones. AT&T Corp. (T - news) and Sprint PCS (PCS - news), meanwhile, have aggressively marketed their wireless services.
The wireless industry has also seen a boom in subscribers. The number of U.S. wireless customers grew 25 percent in 1998 to 69.2 million, according to the Cellular Telecommunications Industry Association.
Some analysts were not convinced Nextel, based in McLean, Va., was the best move for MCI WorldCom since it would have held back profits in the near term. Nextel's network also is not as complete as some rivals and its phones can't ''roam'' or interconnect with other wireless networks.
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More Quotes
and News: Airtouch Communications Inc (NYSE:ATI - news)
AT&T Corp (NYSE:T - news)
Bell Atlantic Corp (NYSE:BEL - news)
MCI WorldCom Inc (Nasdaq:WCOM - news
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