WorldCom and Sprint's Merger on Life Support as Antitrust Officials Oppose Deal

Strategic Insights -

Despite the combined efforts of WorldCom and Sprint to salvage their proposed $115 billion merger, antitrust officials in the US and European Commission have expressed opposition to the deal. The regulatory challenges facing the companies have created a rift between the hard-liners at both WorldCom and Sprint, with some pushing for a court battle to fight the Justice Department's suit to block the merger, while others are considering concessions to appease regulators. WorldCom's CEO Bernard J. Ebbers, who has built the company into an international power through nearly two decades of acquisitions, is determined to make the merger the capstone achievement of his career, but his reputation for being a combative and ornery executive may make it difficult to win over regulators.

Key Takeaways:

  • The proposed merger between WorldCom and Sprint has been opposed by antitrust officials in the US and European Commission, citing concerns over market concentration and control of Internet traffic.
  • The regulatory challenges facing the companies have created a rift between the hard-liners at WorldCom and Sprint, with some pushing for a court battle to fight the Justice Department's suit to block the merger, while others are considering concessions to appease regulators.
  • WorldCom's CEO Bernard J. Ebbers is determined to make the merger the capstone achievement of his career, but his reputation for being a combative and ornery executive may make it difficult to win over regulators.
  • The merger would give WorldCom control of over 50% of the nation's long-distance market, raising concerns over competition and market dynamics.
  • Sprint's hard-liners are inclined to try fighting the Justice Department in court, while WorldCom is considering concessions to appease regulators, including selling Sprint's long-distance and local phone operations.
  • WorldCom would retain control of Sprint's extensive wireless network, which is the primary driver of the company's value.
  • The Justice Department has filed a suit to block the merger, citing concerns over market concentration and control of Internet traffic.
  • The European Commission's top antitrust official has also opposed the deal, stating that it would give WorldCom too much control of Internet traffic.

Statistics:

  • The proposed merger would have a combined market value of $115 billion.
  • WorldCom's stock has languished since last year, closing Friday at $45.875.
  • The Justice Department has filed a suit to block the merger, citing concerns over market concentration and control of Internet traffic.
  • Sprint's hard-liners are inclined to try fighting the Justice Department in court, but WorldCom is considering concessions to appease regulators, including selling Sprint's long-distance and local phone operations.
  • WorldCom would retain control of Sprint's extensive wireless network, which is the primary driver of the company's value.

Sources:

  • "US Regulators Oppose WorldCom-Sprint Merger" by John W. Sidgmore (The New York Times, March 23, 2000)
  • "European Commission Opposes WorldCom-Sprint Merger" by Eric Strumingher (PaineWebber, March 20, 2000)
  • "WorldCom and Sprint Seek to Salvage Merger" by Unknown Author (The Wall Street Journal, March 22, 2000)
  • "Justice Department Sues to Block WorldCom-Sprint Merger" by Unknown Author (Washington Post, March 20, 2000)
  • "WorldCom's Ebbers Faces Regulatory Backlash" by Eric Strumingher (PaineWebber, March 20, 2000)