SAN MATEO (03/06/2000) - IN A MOVE largely designed to head off federal regulators, Sprint Corp. is now working to spin off its Internet backbone assets and related services into a separate business unit.
Sprint and merger mate MCI WorldCom have long suspected that federal regulators scrutinizing their proposed merger would demand that one of the two companies dump its Internet backbone networks.
A Sprint working group is now scrambling to develop a plan over the next 30 to 60 days to peel those networks out of the company's core business units, sources confirmed.
"It makes sense for them to do this, especially if you look at the Internet as a separate product set and business that should not be dragged down by everything else," said Melanie Posey, an analyst for International Data Corp., in Framingham Mass.
Sprint has detailed threefold reasoning for launching the new Internet company, said a source familiar with the plans.
First, the move would make Sprint a more nimble Internet player should the merger with MCI WorldCom fall through.
The company also anticipates that the restructuring would better match Sprint with MCI WorldCom, which has its Internet backbone assets contained in its UUNet subsidiary.
Finally, the new positioning would give Sprint a leg up when and if government regulators at the Department of Justice and the Federal Communications Commission demand a divestiture of backbone assets.
"Sprint would probably have to do this anyway, and they are likely looking for a valuation of their Internet piece to use when they try to sell it," said IDC's Posey.
The move also matches current Wall Street trends, Posey continued.
"There is a real mania going on now for tracking stocks," she said recapping Sprint's steps in the past to spin out its PCS wireless holdings.
Meanwhile, AT&T has parsed its wireless assets into a separate tracking stock, and Global Crossing is doing the same with its Global Center.
Sprint Corp., in Kansas City, Mo. and is at http://www.sprint.com.
Jennifer Jones is an InfoWorld senior editor.