Disconnected WorldCom Deal Hangs Up Users

SAN MATEO (06/30/2000) - For corporate customers caught in the middle of the rocky, short-lived union between WorldCom Inc. and Sprint Corp. -- a merger that appeared all but dead last week -- life can be filled with uncertainty and the unsettling feeling that suppliers are becoming too distracted by the flurry of merger activity.

As one Sprint enterprise customer characterized the events this week, it's like being forced "to stay in a limbo pattern."

A bumpy sort of limbo, it would seem. This week WorldCom and Sprint were rocked with twin blows from both sides of the Atlantic in their bid to blend, which was made last fall. First, the U.S. Department of Justice claimed the union would lead to higher prices for consumers and vowed to file a lawsuit to block the merger. The European Commission then made good on its threats to stop the $115 billion deal, officially nixing it even after the companies withdrew their intent to merge, which had been pending before the European Union.

And then right after that double thumbs-down, German carrier Deutsche Telekom AG-- perhaps in an effort to capitalize on all of the uncertainty -- jumped into the headlines, apparently scrambling to squirrel away the capital it would need to make a run at buying Sprint.

Industry watchers last week were declaring the merger dead, but the alleged interest from Deutsche Telekom, and possibly others eyeing Sprint, means the ultimate outcome could still be a ways off.

And that's an uncomfortable spot for some telecommunications buyers. "I've had some real mixed feelings about this. On the one hand, I'm thrilled it didn't happen because I was concerned about us getting locked up with a big, unresponsive company," said Mason Rotelli, CIO of Carol Stream, Illinois-based Communications Supply, a Sprint customer.

"But had the merger gone through, we would have had this behind us. Now it appears that if it is not [WorldCom] it will be somebody else," Rotelli added.

Enterprise customers, including Rotelli, say that although WorldCom and Sprint remain largely attentive on a day-to-day basis they gave the overall impression of being distracted from the business of providing telecommunications service by the action surrounding their pending union.

Many big business telecommunications buyers also fret that the combination of WorldCom and Sprint would mean fewer responses to the RFPs (requests for proposals) they crank out regularly for networking services.

"Customers like to have options, and no customer wants to live with fewer options," said Goutham Surapaneni, CTO of Farmington Hills, Michigan-based Complete Business Solutions Inc., a Sprint customer.

On the other hand, some enterprise buyers and analysts said that the combination of WorldCom and Sprint might have generated advances in technology a bit quicker.

"If MCI wants to create essential services of the modern economy, their only choice is to spend a fortune of money in acquisitions. They certainly do not enjoy the privilege of time that it would take to build-out their own infrastructure," Surapaneni said.

WorldCom will most likely make a quick, fresh play at another wireless carrier because Sprint's PCS wireless initiative was the key to WorldCom's attraction to Sprint, sources said.

"They'll want to make a wireless acquisition in a hurry, because they're demoralized," said Steve Koppman, a senior analyst at Dataquest Inc., in Oakland, California.

Other Sprint features that held WorldCom's interest include the carrier's Integrated On-demand Network (ION) service which converges voice, video, and data over a single infrastructure. Sprint is also forging ahead with a fixed wireless broadband rollout that would serve as companion to WorldCom's.

In WorldCom, Sprint saw a partner with a gargantuan infrastructure to house Sprint's products and services. Together, the two said they could better compete with AT&T Corp. and Bell Atlantic Corp.-GTE Corp., which is now Verizon Communications.

Officials at both WorldCom and Sprint were hesitant to say merger plans are over. A Sprint representative said that the company held out hope that "ultimately a merger [could] be reached." A WorldCom representative would not say whether WorldCom remained interested in the deal, given its apparently grim shot at passing muster.

"It sounds like WorldCom is picking up their bat and ball and going home," commented Jeff Kagan, an Atlanta-based independent telecommunications analyst.

Elizabeth de Bony and James Niccolai, correspondents for the IDG News Service, an InfoWorld affiliate, contributed to this story.

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