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Global Media Mergers Face Challenges from Regulators

Strategic Insights

— 1 min read

European Union antitrust chief Mario Monti has stated that a proposed merger between WorldCom and Sprint Corp. has a "less than satisfactory" response to concerns from international regulators, virtually sealing the fate of the deal. Meanwhile, a recently approved acquisition by AT&T Corp. of MediaOne Group Inc. and America Online Inc.'s pending purchase of Time Warner Inc. are facing opposition from U.S. regulators. The complexities of cross-ownership and potential monopolies have raised concerns among critics, including a consumers group that has urged the U.S. government to investigate links between AT&T and AOL-Time Warner.

Key Takeaways:

  • The proposed merger between WorldCom and Sprint Corp. has been deemed "less than satisfactory" by European Union antitrust chief Mario Monti, putting the deal in jeopardy.
  • The European Commission must make its decision on the merger by July 12, and a refusal by the European Union could lead to a prohibition of the merger.
  • The $129 billion deal has also faced opposition from U.S. regulators due to concerns about the companies' dominance in long-distance service and Internet access.
  • The recent acquisition by AT&T Corp. of MediaOne Group Inc. has raised concerns about cross-ownership and monopolies, with a consumers group urging the U.S. government to investigate links between AT&T and AOL-Time Warner.
  • The FTC had given conditional approval to the AT&T-MediaOne merger earlier this year, requiring AT&T to limit its holdings in MediaOne's cable systems.
  • Consumers Union has called for the FTC to require AT&T to sell its interest in Time Warner Entertainment or force Time Warner to restructure to avoid joint ownership of cable properties.

Statistics:

  • The proposed WorldCom-Sprint merger is valued at $129 billion.
  • Shares of Sprint fell 25 cents to $59.56, while shares of WorldCom decreased 25 cents to $37.50.
  • The AT&T-MediaOne merger is valued at $44 billion.
  • AT&T has a 25 percent stake in Time Warner Entertainment, which includes cable systems, HBO, Cinemax, and other cable channels.
  • MediaOne has 25 percent interest in cable systems owned by Time Warner.
  • The MediaOne merger includes over 9.7 million cable subscribers.

Sources:

  • "EU Antitrust Chief Deals Blow to Sprint-WorldCom Merger". The Washington Post.
  • "Report's Implications for U.S. Regulatory Enforcement".
  • "AOL, Time Warner Shareholders Approve Merger". New York Times.

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