MCI reportedly offers to sell Internet units Move made to gain OK for takeover by Worldcom

Telecommunications

June 16, 1998|By NEW YORK TIMES NEWS SERVICE

Continuing to try to win regulatory approval of its $37 billion acquisition by Worldcom Inc., MCI Communications Corp. has offered to sell additional components of its Internet business, people close to the negotiations between MCI and regulators said yesterday.

It was unclear how precise MCI had been in its offer, but the people close to the discussions said MCI had offered to sell parts of its Internet business that were not included in the $625 million deal that MCI struck with Cable and Wireless PLC last month.

Justice Department and antitrust regulators from the European Union are weighing Worldcom's planned takeover of MCI, which was announced in the fall. The regulators are concerned that the combined MCI-Worldcom could wield dominant power in the Internet industry.

MCI, the nation's No. 2 long-distance telephone company, is also one of the country's largest Internet carriers. Worldcom's Uunet operation is the world's biggest Internet-service provider.

MCI made a big gamble last month when it announced a deal to sell the wholesale part of MCI's Internet business to Cable and Wireless, but not the units that provide data services directly to consumers and large business customers. Before the deal was made public, MCI tried to win assurances from regulators that the Cable and Wireless arrangement would be sufficient to allay antitrust concerns about MCI-Worldcom, but the regulators refused to sign off on either deal.

In the apparent hope that it could present the regulators with a fait accompli, MCI went ahead and announced the Cable and Wireless deal anyway.

"By divesting MCI's Internet backbone, we have eliminated any overlap with Worldcom's Internet business," the chairman of MCI, Bert Roberts Jr., said at the time. "We have formed an agreement that addresses antitrust concerns with the MCI-Worldcom merger."

The regulators did not agree. Karel van Miert, the European Union's competition commissioner, has made no secret of his intention to oppose MCI's deal with Worldcom unless the companies sell additional Internet assets.

The European Union has said it may not make a formal decision on the MCI-Worldcom merger until July 15.

The Justice Department has not set a formal timetable for its deliberations.

The regulators hold significant bargaining power in their negotiations, especially with Worldcom. If the MCI-Worldcom deal does not win the necessary regulatory approvals by the end of the year, MCI can demand $1.6 billion in cash from Worldcom and walk away from the deal.

Pub Date: 6/16/98

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