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Technology Stocks : WCOM -- Ignore unavailable to you. Want to Upgrade?

To: John Koligman who wrote (6831)	6/21/2000 7:42:00 PM
From: Gary Yerman	Read Replies (1) \| Respond to of 11568

FREE SUBSCRIPTION TO UPSIDE MAGAZINE \| In Newsroom \| Update: WorldCom reportedly to sell Sprint assets June 21, 2000 by Rex Crum WorldCom Inc. (WCOM) has apparently decided that a small Sprint is better than no Sprint at all. The Financial Times of London is reporting that Clinton, Miss.-based WorldCom will sell off the entire Internet and long-distance operations of Sprint Corp. (FON) for $40 billion to $45 billion. The proposed sale would be made to allay monopolistic concerns that U.S. and European regulators have over WorldCom's $115 billion purchase of Sprint. WorldCom officials would not comment on the proposed sale. European regulators have reportedly considered blocking the deal. Mario Monti, the European Union's competition commissioner, was in Washington, D.C., today to meet with Joel Klein, antitrust chief of the Department of Justice, to discuss cases such as the WorldCom-Sprint deal. A few wireline assets left The sale would leave WorldCom with only a few of Sprint's wireline assets, which are believed to be worth between $5 billion and $10 billion. WorldCom would also get control of Sprint PCS (PCS), Sprint's wireless network, valued at about $58 billion. The proposed sale still needs the approval of WorldCom's board of directors and U.S. and European antitrust regulators. European regulators had been pushing for WorldCom to sell off a major part of its operations and had been smarting since London-based Cable & Wireless Communications bought MCI's Internet business from WorldCom in 1998. "The EC has been concerned ever since WorldCom sold off its MCI assets to Cable & Wireless," said Berge Ayvazian, president of The Yankee Group. "That amounted to nothing." Last year, C&W sued WorldCom, saying it failed to correctly hand over MCI's Internet customer base. As a result, C&W claimed that it could not effectively sell services to the former MCI customers and that growth of its Internet business had slowed by 65 percent. In March, WorldCom agreed to pay $200 million to C&W to settle the lawsuit. Ebbers won't let UUNet go Many analysts have said that until now, the key for WorldCom to get the merger approved was the company's Internet backbone. UUNet reportedly delivers between 40 percent and 50 percent of all U.S.-based Internet traffic. WorldCom CEO Bernard Ebbers has said he will never give up UUNet and would kill the deal if he were required to sell off the prized unit. Brownlee Thomas, an analyst with Giga Information Group, said shedding Sprint's Internet backbone and long-distance operations shows the company doesn't want a drawn-out fight with regulators. "You've got to give something with some teeth to it." The real issue? Long distance But Ayvazian of the Yankee Group says all the posturing over what happens in Europe just clouds up the real issue behind the merger: the long-distance market in the U.S. Ayvazian says that nearly 5 years after the Telecommunications Act, which was supposed to open the long-distance market to local carriers, very little has happened to actually increase the number of long-distance providers in the United States. Ayvazian says that if WorldCom wants to really erase antitrust concerns, the company should trade approval of its merger for immediate access to the long-distance market for local carriers. "Between AT&T (T) and WorldCom, they've got control over 75 percent of the U.S. market," Ayvazian said. "You can't argue that this measure is anti-competition, because it is. [WorldCom] should suggest that all local Bell companies get entry into the long-distance market if they want to make some headway." Any sale of Sprint's long-distance assets is expected to draw in several potential bidders. Already, Bell South Corp. (BLS) and Deutsche Telekom AG (DT) are considered likely to make bids for Sprint. Both companies lost out in their attempts to buy Sprint last year. WorldCom shares closed down $1.38, to $40.31, while Sprint shares fell $1.13, to $59, at the close of trading today. Rex Crum is a reporter at UpsideToday covering telecom, broadband and wireles