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To: Sonny McWilliams who wrote (2611)	6/15/1998 7:40:00 PM
From: Caxton Rhodes	Read Replies (1) \| Respond to of 11568

MCI Puts More Internet Assets on the Table By Dawn Hayes at Bloomberg News 15-JUN-98 MCI Communications Corp. offered to sell all its Internet assets to win European Union regulatory approval for WorldCom Inc.'s $40.2 billion acquisition of MCI, said an EU official close to the negotiations. ÿÿÿÿÿÿ Cable & Wireless Plc, the UK's No. 2 telephone company, insisted today it still had an agreement to buy some of MCI's Internet assets. It also said MCI agreed to negotiate with it first before it sells the rest, even though a US court ruled Friday MCI can look for other buyers. ÿÿÿÿÿÿ Negotiations between MCI, WorldCom and regulators in Europe and the US threatened to undermine the agreement between Cable & Wireless and MCI, which would considerably boost the UK company's US and international presence. MCI agreed to sell its wholesale Internet business for $625 million to Cable & Wireless earlier this month. MCI's corporate accounts and retail Internet business were not included in the agreement. ÿÿÿÿÿÿ "The issue is whether MCI's entire Internet business goes up for auction or whether it goes at a price that suits Cable & Wireless," said Keith Mallinson, managing director of telecoms consultancy, The Yankee Group Europe. "The economic justification for buying the enlarged Internet business is quite possibly weaker for an organization that doesn't already have a stronger North American presence." ÿÿÿÿÿÿ However, Cable & Wireless remains confident its agreement with MCI will proceed as planned. ÿÿÿÿÿÿ "We're pleased that as part of the proceedings, all parties agreed our contract is still in force," said a spokesman for Cable & Wireless. "We're still in discussions with MCI so we'll see what happens." ÿÿÿÿÿÿ He declined to say whether Cable & Wireless will bid for the enlarged MCI Internet business or what it will do if it loses the wholesale business. ÿÿÿÿÿÿ Last week Cable & Wireless sought an injunction in a US court to require MCI to comply with its agreement to sell its wholesale Internet business to the UK company. The court refused to grant the injunction. Setback "This is a setback for Cable & Wireless rather than a grave disappointment," said Jim Sloane, a telecoms analyst at Deloitte & Touche Consulting. "But they're obviously worried - the injunction was quite a severe reaction. It won't have done relations with MCI any good." ÿÿÿÿÿÿ EU regulators view MCI's new proposal as a positive step toward securing European approval for the acquisition, said an official close to the negotiations. He said MCI still needs to deliver a formal proposal clarifying some aspects of the offer in order to convince EU regulators it's divesting its entire Internet network. ÿÿÿÿÿÿ One stumbling block, he said, is finding a way to transfer MCI's Internet services customer accounts to the buyer without interfering with MCI's agreements to provide other telecoms services to retail customers. MCI's Internet services business is integrated with MCI's other telecoms services, making it difficult to separate the two customer bases, the official said. ÿÿÿÿÿÿ He wouldn't say whether MCI's offer included naming a buyer for the assets. He said, though, that the buyer would have to meet EU criteria. It would have to be a viable competitor to MCI and to guarantee that it would put the assets to good use in the market and that it would be prepared to invest in further developing the assets. ÿÿÿÿÿÿ The agreement will have to include a guarantee from MCI that it won't try to lure its old customers back for a certain period of time following the sale, the official said. ÿÿÿÿÿÿ The official said he expects MCI to deliver the necessary details in coming days, allowing regulators to decide whether to approve or block the WorldCom acquisition before Friday's meeting of an advisory committee of competition officials from the 15 EU nations. Scarce Property If Cable & Wireless loses the opportunity it seized to buy MCI's wholesale Internet business, it will find it difficult to replicate it, analysts said. ÿÿÿÿÿÿ "It was very serendipitous that this opportunity appeared and Cable & Wireless was able to get it," said Mallinson. "It's a pretty scarce property, there are not that many international Internet assets around as most have fallen into UUnet's clutches." UUnet is owned by WorldCom. ÿÿÿÿÿÿ The EU official said MCI's offer to sell its other Internet business is a positive move in ensuring that overlap between WorldCom's and MCI's Internet backbone businesses is eliminated. Regulators are worried that a combined WorldCom-MCI would control more than half of the world's Internet traffic. ÿÿÿÿÿÿ "They've told us they will go out for a rebid on assets that include those involved in this transaction," Charles Lettow, Cable and Wireless's lawyer, said at Friday's hearing. Lawyers for Cable & Wireless asked for a temporary order enforcing the May 28 agreement between the companies. ÿÿÿÿÿÿ Potential bidders for MCI's Internet businesses include IXC Communications Inc., AT&T Corp., Sprint Corp., GTE Corp. and PSINet Inc., analysts said. WorldCom officials weren't available to comment. ÿÿÿÿÿÿ It's likely that one buyer would get all of MCI's Internet assets, leaving Cable & Wireless empty-handed except for a $25 million payment from MCI for breaking the earlier sales agreement - unless it wins the bidding, industry analysts and antitrust attorneys said. ÿÿÿÿÿÿ <Picture: CI Report>Related Stories Stories Related by Keyword