Report: EU will block WorldCom-Sprint merger

The European Commission intends to block the planned merger between two US-based telecommunication companies, Sprint and WorldCom, according to media reports published Wednesday.

In February, the European Union (EU) launched an in-depth antitrust investigation into the planned merger -- valued at between $US118 billion and $130 billion -- due to concerns that the venture will reinforce the entity's dominance over a number of key services, specifically in the area of high-speed Internet connections.

Just before the investigation was launched, WorldCom offered to divest Sprint's Internet backbone services, but this proved insufficient to quell all the Commission's fears about the elimination of competition between WorldCom and Sprint in this field.

WorldCom repeated its offer last week, but reportedly still failed to win over the Commission.

The Commission will speak with the member countries' competition authorities and explain the reasoning behind the planned veto, according to a report published in the Financial Times on Wednesday. It is extremely rare for the national authorities to go against Commission decisions.

The European Commission is formally meeting on July 5, at which time the decision will likely be adopted or rejected by the EU.

Last week while speaking at Sprint's annual shareholders' meeting in Westwood, Kansas, Sprint Chairman William T. Esrey said he is no longer as optimistic as he once was that the deal will be approved, due in part to concerns raised by the US Department of Justice.

"As you may have read or heard in the media, the staff of the Department of Justice has recommended the merger be blocked," said Esrey in his speech. "It is also apparent that the staff recommendation (to block the merger) is being taken seriously by senior officials at the DOJ. We have had a number of high-level meetings with Justice Department officials in recent weeks, but it remains unclear if we will or will not get the necessary government clearances to implement the merger."

Esrey refused to speculate on the eventual outcome of the deal.

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