NEW ORLEANS (07/12/2000) - Bernard Ebbers, president and CEO of WorldCom Inc., Tuesday all but conceded that his company's proposed US$129 billion acquisition of Sprint Corp. is dead and blasted the U.S. Department of Justice and Attorney General Janet Reno for putting regulatory roadblocks in the way of the deal.
Both the DOJ and the European Union have said they want to block the merger on the grounds that it would stifle competition in the telecommunications industry by combining two of the three largest vendors, and analysts expect the government opposition will be enough to kill the deal.
Ebbers, speaking here at the Wireless Communications International Association annual conference, repeatedly ducked questions about whether and when WorldCom and Sprint would call off the merger. At first, he said after his keynote address that he wouldn't comment on the matter at all because there was "not much left to discuss."
But Ebbers then declared that he viewed the actions of the DOJ as "extremely ominous." He decried regulatory approval for acquisitions in which telecommunications "monopolies were allowed to expand their territories" and said the legacy of Reno and DOJ antitrust chief Joel Klein could be the "re-monopolization" of the industry, particularly on the local level.
Ebbers didn't criticize any specific mergers that have been approved by the DOJ. But earlier, in his speech, he cited the ease with which Bell Atlantic Corp. was able to complete its acquisition of GTE Corp.'s wireless assets for inclusion in Verizon Wireless, a new company that also includes the wireless operations of Vodafone AirTouch PLC.
Both WorldCom and Sprint have spent billions of dollars to acquire fixed wireless licenses for use in providing broadband "last mile" connections to business and residential customers. And WorldCom officials repeatedly said combining the wireless properties of the two companies would help them compete against Baby Bells and rivals such as Verizon.
But Ebbers Tuesday said the ability of the companies to fill gaps in their respective broadband services has "taken a giant step backwards" because of the opposition from the DOJ and the European Union. He added that their wireless offerings now "will not come together," a comment that analysts saw as a clear indication that the merger is history.
A DOJ spokeswoman said the agency had no response to Ebbers' comments.
Ebbers "is definitely wounded and angered" by the government's opposition to the Sprint deal, said Jeff Kagan, an independent analyst in Atlanta. It's the first time federal regulators have said no to WorldCom after more than 60 successful acquisitions that the Jackson, Miss.-based company has made, Kagan noted.
But Ebbers' criticism notwithstanding, the prospect for future mergers in the telecommunications business isn't necessarily dire, according to Kagan.
"Basically, it's a timing issue," he said, adding that the WorldCom/Sprint deal might well have been approved a year from now, after the Baby Bell companies expand into the long-distance business.