Bell Companies Push for Conditions on WorldCom's MCI Purchase

Strategic Insights -

Two Baby Bell phone companies are urging the Federal Communications Commission to impose conditions on WorldCom Inc.'s planned acquisition of MCI Communications Corp. Atlanta-based BellSouth Corp. and New York-based Bell Atlantic Corp. are seeking the FCC's approval to let Bell companies enter the long-distance business in their respective regions, arguing that this would unleash "powerful new pro-consumer forces" that could counteract the impact of WorldCom's acquisition. Bell Atlantic also wants WorldCom to divest some of its Internet backbones to prevent it from dominating the Internet, as it would control over 60% of commercial Internet traffic after the merger.

Key Takeaways:

  • BellSouth Corp. and Bell Atlantic Corp. have filed with the Federal Communications Commission to impose conditions on WorldCom Inc.'s purchase of MCI Communications Corp.
  • The conditions include allowing Bell companies to enter the long-distance business in their territories, which they argue would promote competition and benefit consumers.
  • Bell Atlantic wants WorldCom to divest some of its Internet backbones to prevent dominance in the Internet market.
  • Bell Atlantic also seeks approval for Bell companies to resell WorldCom's long-distance service.
  • The Bell companies' entry into the long-distance business in their territories would require them to prove their markets are fully open to competition.
  • WorldCom agreed to buy MCI for $41.8 billion, including assumed debt, in November 1998.
  • GTE Corp. has also filed with the FCC to deny the WorldCom-MCI purchase, citing a lack of evidence that the acquisition would benefit the public.

Statistics:

  • 60% of commercial Internet traffic would be controlled by WorldCom after the merger.
  • The Bell companies have failed to prove their markets are fully open to competition in the past, with three of them trying and failing.
  • 13 states and Washington are already served by Bell Atlantic.
  • 9 states in the Southeast are covered by BellSouth Corp.
  • $51 per share was the agreed-upon price for MCI's purchase by WorldCom.
  • $41.8 billion is the total price of WorldCom's acquisition of MCI, including assumed debt.

Sources:

  • Bloomberg News
  • WASHINGTON
  • GTE Corp.
  • Federal Communications Commission