WorldCom/Sprint Merger is officially dead

WorldCom and Sprint yesterday said they are walking away from the troubled merger deal announced nine months ago.

The companies put out statements this morning saying the board of directors of WorldCom and Sprint "have acted to terminate their merger agreement".

"While we disagree with the conclusions reached by the Department of Justice on the competitive impact of the merger, litigation of those conclusions in federal court is not a realistic alternative. The Justice Department said it would not be able to go to trial before January 2001. Approval of the merger by the Federal Communications Commission and the European Commission would still be needed after the successful conclusion of the trial," a separate statement from Sprint chairman and CEO William Esrey said.

On October 5 of last year, WorldCom president and CEO Bernard Ebbers and Esrey confidently announced the proposed merger of the two companies. The deal, valued at $US129 billion, the largest in history, would sail through regulator approval by this time, both companies portended.

But industry watchers immediately criticised the deal, claiming that WorldCom and Sprint's combined internet assets would raise eyebrows with regulators. WorldCom was already familiar with this problem. When WorldCom acquired MCI over two years ago, the companies had to divest MCI's entire internet business in order to gain regulatory approval.

And WorldCom and Sprint's internet assets were only the tip of the iceberg. Earlier this year, reports surfaced that made it clear that regulatory bodies in the US were not only concerned about the combined internet market share of the companies, but also the combined data and long-distance voice market share.

On June 27, the Justice Department announced it was filing suit to block the merger of the number two and the number three US service providers. On the same day, WorldCom and Sprint withdrew the proposed merger notification that they filed with the European Union, creating a pretty grim outlook for the successful conclusion of the deal, which is now officially dead.

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