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

To: Anthony Wong who wrote (2641)	6/17/1998 5:56:00 PM
From: Anthony Wong	Read Replies (1) \| Respond to of 11568

WorldCom's Buy of MCI Still Raises Long-Distance Concerns Bloomberg News June 17, 1998, 4:46 p.m. ET WorldCom's Buy of MCI Still Raises Long-Distance Concerns Washington, June 17 (Bloomberg) -- The U.S. Justice Department is still reviewing whether WorldCom Inc.'s proposed $42 billion acquisition of MCI Communications Corp. might reduce competition in the wholesale long-distance business, say industry officials familiar with the inquiry. The primary issue for antitrust regulators on both sides of the Atlantic is that the combined company will dominate the Internet. MCI is seeking a buyer for all of its Internet transmission services in hopes of winning approval of the combination from the European Commission, the Justice Department and the U.S. Federal Communications Commission. ''We remain confident we will gain regulatory approval for the merger,'' said MCI spokesman Frank Walter. MCI doesn't believe there are ''any other issues'' that concern antitrust enforcers ''other than the Internet issue.'' Industry analysts said the long-distance issue alone probably wouldn't prevent approval of the combination. Still, opponents of the transaction, notably GTE Corp., argue that WorldCom would raise wholesale prices for long- distance capacity paid by resellers if it joins forces with MCI, the nation's No. 2 retail long-distance carrier. Wholesalers like WorldCom sell their long-distance service to new competitors who then resell it under their own brand name to businesses. ''Upon acquiring MCI's brand and lucrative retail customer base, WorldCom would no loner be as aggressive and responsive as a wholesaler,'' GTE, a long-distance reseller, said in a filing with the FCC. Baby Bells Subpoenaed While the Justice Department primarily focuses on the Internet issues, it continues to ask telephone companies for information about the combination's impact on the long-distance wholesale market, said industry officials who spoke on condition of anonymity. GTE Corp., Sprint Corp., and four of five Baby Bell phone companies -- Bell Atlantic Corp., BellSouth Corp., Ameritech Corp. and US West Corp. -- responded earlier this spring to civil subpoenas, company officials have confirmed. Since then, Justice Department antitrust enforcers continue to talk with the companies and executives about the wholesale long-distance market, the industry officials said. They said any concern antitrust enforcers have with long- distance service probably would not delay the transaction, since new competitors like Denver-based Qwest Communications International Inc., Tulsa-based Williams Cos. Inc. and IXC Communications Inc. of Austin, Texas, are moving quickly into the market. ''From a purely procedural matter, the Justice Department has to look at the long-distance competition issues'' because MCI and WorldCom are among the four companies that control 80 percent of the wholesale market, said Scott Cleland, a Washington analyst for Legg Mason Inc. The other companies are Sprint and AT&T. The market concentration posed by the combination ''clearly is a problem that requires in-depth scrutiny, but probably is not an obstacle to the merger,'' he said. Open Market Competition is likely to come in the long-distance arena as soon as the regional operating Bells are cleared to enter the market, he said. The Baby Bells created by the breakup of AT&T must allow the long-distance carriers to compete against their local operations before they can get that clearance. The process could take two years, Cleland said. ''This is a very open competitive market. That is clearly evidenced by the fact you have companies like Qwest, IXC and Level 3 announcing major contracts daily,'' MCI's Walter said. Economist Richard Schmalensee, a member of ex-President George Bush's Council of Economic Advisers who was hired as an expert by GTE, said he doubts the new companies can quickly become effective competitors. ''The entrants are small and not likely to achieve quickly WorldCom's scale or scope,'' said Schmalensee and consultant William Taylor in GTE's latest FCC filing. Competition from these companies ''would not undermine the ability or the incentive for MCI-WorldCom to increase wholesale prices and/or limit the supply of wholesale services,'' the two economists wrote. Walters said ''any attempt by GTE to distort the facts of this market are part of their disinformation campaign which they continue to wage.'' Shares in Washington-based MCI were up 3 3/8 at 54 3/4. Shares of the Jackson, Mississippi-based WorldCom rose 1 13/16 to 45 13/16. --James Rowley in Washington at 202-624-1913 /jhr