MCI WorldCom Inc. and Sprint Corp. yesterday filed papers with the Federal Communications Commission asking for the right to blend into a single company in a $129 billion all-stock deal that would, if approved, stand as the largest merger ever.
In a docket as thick as a telephone book, the nation's second- and third-largest long-distance telephone companies asserted that their fusion would be a boon to consumers. The companies said the merger would give them the heft to compete with the titans of the communications industry, AT&T Corp., Bell Atlantic Corp. and SBC Communications Inc., hastening local competition and the deployment of high-speed Internet access without rolling back competition in the long-distance market.
The application faces serious regulatory obstacles. Knowledgeable sources have said that federal regulators are unlikely to approve the deal, because it would leave 80 percent of the long-distance market in the hands of two companies--AT&T, which has about half the market, and the new WorldCom Inc.
In public statements over the weekend, officials with the FCC and the Justice Department--both of which must approve the deal--stressed that neither agency has prejudged the filing, while offering assurances that it will undergo the usual review.
At a news conference yesterday, attorneys for MCI WorldCom and Sprint expressed confidence that they would be able to convince regulators that the deal serves the public interest. They said concerns about the long-distance market miss the point that the real battlefield is the entire telecommunications market. Now, competition focuses on selling local, long-distance, wireless and high-speed Internet connections in a single package. In that context, the companies argue, the deal amounts to a merger between the fourth- and seventh-largest American communications companies. The resulting WorldCom would still be fourth, they said.
Moreover, they argued, a glut of long-distance capacity delivered by new communications networks ensures that the new company could not raise prices or cut service without ceding market share to competitors.
CAPTION: Chief executives Bernard J. Ebbers of MCI WorldCom, right, and William T. Esrey of Sprint face the beginning of questions about the deal in October.