MCI Communications Corp. Sells Wholesale Internet Business to Approve WorldCom Merger

Strategic Insights -

In a significant move, MCI Communications Corp. agreed to sell its wholesale Internet business to Cable & Wireless PLC for $625 million. This decision is aimed at addressing antitrust regulators' concerns about its planned merger with WorldCom Inc., which was valued at $37 billion. The sale is expected to pave the way for the merger's approval, as it eliminates any overlap between MCI's Internet backbone business and WorldCom's. Industry analysts have reacted positively to the deal, with MCI's stock increasing by $1.41 a share to close at $53.94.

Key Takeaways:

  • MCI sold its wholesale Internet business to Cable & Wireless PLC for $625 million to address antitrust regulators' concerns about its merger with WorldCom Inc.
  • The sale eliminates any overlap between MCI's Internet backbone business and WorldCom's, reducing concerns about the combined company controlling too much traffic on the Internet.
  • Industry analysts believe the merger will go through, as the sale has addressed the main antitrust concern.
  • The merged company will have approximately 20% control over the Internet backbone service, not the 48-68% or 40-60% control previously assumed by some critics.
  • MCI is transferring 1,300 customers, 50 employees, and leasing fiber-optic capacity to Cable & Wireless to operate the Internet backbone business.
  • The transaction is aimed at resolving the main concerns raised by the merger, according to MCI spokesman Jim Monroe.
  • Analysts believe the merged company will not have significantly more Internet backbone capacity than WorldCom has currently.

Statistics:

  • $625 million: The amount MCI agreed to sell its wholesale Internet business for.
  • $37 billion: The value of the MCI-WorldCom merger.
  • $1.41: The increase in MCI's stock prices after the announcement.
  • $53.94: The closing price of MCI's stock after the announcement.
  • 20%: The approximate control the merged company will have over the Internet backbone service.
  • 1,300: The number of customers being transferred to Cable & Wireless.
  • 50: The number of MCI employees being transferred to Cable & Wireless.

Sources:

  • MCI Chairman Bert Roberts
  • MCI spokesman Jim Monroe
  • Jeffrey Kagan, a telecommunications analyst based in Atlanta
  • GTE Corp.
  • Economic Policy Institute of Washington
  • Cable & Wireless PLC
  • National Science Foundation