Regulators Clear Way for $40 Billion WorldCom Deal
Washington Post Staff Writers
Tuesday, September 15, 1998; Page C04
MCI Communications Corp., a stand-alone company since its founding in the District in 1968, is no more.
MCI finalized its purchase by Mississippi upstart WorldCom Inc. yesterday, after federal telephone regulators granted their approval of the $40 billion deal.
The newly combined company is the world's fourth-largest telecommunications carrier and will do business under the name MCI WorldCom.
Company officials plan a series of announcements in coming days that will detail what they call a "local-global-local" strategy. By connecting newly built local phone networks here and abroad to its long-distance network, the company hopes to maximize profits by owning as many links in a communications transmission as possible -- rather than leasing them from other carriers.
"We're going to own the facility from beginning to end," said Timothy Price, MCI's president and chief operating officer, who will run MCI WorldCom's U.S. operations. "It's a network built for data and voice, in that order."
In exchange for its approval, the Federal Communications Commission required MCI to sell nearly all of its Internet transmission business and Internet customer accounts. That condition mirrors similar demands by the Justice Department and the European Commission.
Regulators had feared the combined MCI and WorldCom would unfairly control too much of the world's Internet traffic. A British company, Cable & Wireless PLC, bought MCI's Internet assets yesterday for $1.75 billion.
The MCI Internet sell-off does little to harm MCI WorldCom as an Internet heavyweight, analysts said. WorldCom's Fairfax-based UUNet division is among the world's largest Internet "backbones," with local access available in 1,000 locations worldwide.
MCI WorldCom will have 1998 revenue of more than $30 billion and a market value of $91 billion. Its headquarters will be in Jackson, Miss., though MCI's former Washington headquarters will be the focal point for MCI WorldCom's U.S. operations. MCI has 7,600 employees in the region.
MCI's chairman, Bert C. Roberts Jr., is chairman of the new company, while WorldCom's chairman and founder, Bernard Ebbers, is president and chief executive. MCI's chief executive, Gerald Taylor, is now president and chief executive of WorldCom's international division. John Sidgmore, UUNet's founder and WorldCom's vice chairman, will be president and chief executive of WorldCom's UUNet division.
WorldCom MCI shares will trade on the Nasdaq Stock Market under WorldCom's stock symbol (WCOM). MCI stockholders will get 1.2439 WorldCom shares for each MCI share held. WorldCom shares closed yesterday at $47.75 on Nasdaq.
The final approval caps a year of wild swings in fortune for MCI. Just a year ago, its planned acquisition by British Telecommunications PLC was on the verge of closure. The $22 billion deal had already received approval from the Justice Department.
But BT, spooked by what MCI planned to spend to enter the local phone market, renegotiated the merger in August, with MCI officials grudgingly agreeing to sell for 18 percent less.
Ebbers then made a surprise $30 billion bid for MCI on Oct. 1, 1997. After a brief bidding war with GTE Corp. for MCI, Ebbers increased his bid to $37 in cash and stock. The merger agreement was reached on Nov. 10.
Yesterday WorldCom bought BT's 20-percent stake in MCI for $7 billion. BT shareholders will get $51 in cash for each class A share they own.
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