The largest corporate merger in history was formally announced today as MCI WorldCom Inc., the nation's second-biggest long-distance carrier, agreed to take over Sprint Corp., the third-largest carrier, in a deal valued at $129 billion.

The would-be partners promised that their combination would ultimately bring about wider choices and lower prices for consumers. But even before the announcement, a storm cloud formed above their hopes: William E. Kennard, chairman of the Federal Communications Commission, raised doubt that the merger would easily gain his blessing.

"Competition has produced a price war in the long-distance market," Kennard said in a statement. "This merger appears to be a surrender. How can this be good for consumers? The parties will bear a heavy burden to show how consumers would be better off."

At a news conference in midtown Manhattan, the chief executives of MCI WorldCom and Sprint, Bernard J. Ebbers and William T. Esrey, said the new company would be known as WorldCom, although the brand names of MCI and Sprint would live on for the foreseeable future. The venture could offer customers everything from local and long-distance telephone connections to high-speed Internet and computer data transmission, all in one package.

Only by joining forces, the executives said, can their companies compete effectively with other titans of the industry -- established powers such as AT&T Corp. and emerging behemoths such as Bell Atlantic Corp. and SBC Communications Inc., which plans to merge with Ameritech Corp.

"All of the changes in our industry make it so right today," Ebbers, who will remain as chief executive of WorldCom, said of the Sprint takeover. "Together we will continue to lead the industry in innovative services. . . . This merger is about growth -- growth in services for our customers, growth in revenue for our investors."

Some analysts agree, viewing consumer and corporate interests as converging, much the same way the formerly disparate pieces of the communications world -- local, long-distance and Internet -- are becoming one.

"Shareholder and consumer interests are inextricably linked," said Scott Cleland, an analyst with Legg Mason Precursor Group. "If a company is not doing as well financially, it will cut back on consumer care and support. A strong company is better able to provide strong customer service and innovative products."

But consumer advocates reject that view, portraying the fusion as less about growth and more about contraction: A powerful competitor is being eliminated from the marketplace, removing a downward pull on prices. While AT&T still controls nearly half of the nation's long-distance market, the new WorldCom will claim about a third.

"If there aren't enough competitors out there, they don't have to compete," said Mark N. Cooper, research director for the Consumer Federation of America. "Remember the Big Three automakers? When you didn't have foreign competition, they didn't go head to head. Prices and quality deteriorated. Prices went up. That's what happens when you don't have a lot of head-to-head competition."

Kennard's comments added a powerful voice to that chorus, raising the prospect of long, drawn-out merger negotiations with the federal government. But Ebbers dismissed such concerns, saying he had spoken to Kennard today.

"The chairman told us he would have an open mind," Ebbers said. "We feel very confident that we will be able to show evidence that this is a pro-competitive merger."

Later, Ebbers acknowledged the new company may have to sell off a piece of Sprint, such as its Internet "backbone," the network that moves computer data. MCI and Sprint both boast huge, global backbones. Two years ago, when WorldCom swallowed up MCI, the resulting company had to sell off some of its data-transmission network.

If the regulatory realm offered uncertainty, the bidding war for Sprint appeared to be over. Vastly diminished was the possibility that a rival would sweep in and try to woo Sprint away with promises of more money, as local phone giant BellSouth Corp. tried to do over the weekend and through Monday with an unsolicited bid exceeding $100 billion that forced MCI WorldCom to sweeten its offer. Yesterday, BellSouth said it had taken itself out of the running.

Esrey, who will become WorldCom's chairman, said the deal establishes a 60-day quiet period during which Sprint may not entertain other offers. Were Sprint to walk away, it would have to pay a $2.5 billion "breakup fee" to MCI WorldCom, he added.

Less clear is what happens to Sprint's international partnership with Deutsche Telekom AG and France Telecom in a business known as Global One. Sprint executives acknowledge privately that the deal has been a disaster, with squabbling among the partners over pricing discounts and competition.

Now that Sprint is marching off with a deep-pocketed partner that has a global presence of its own, Global One could well be on its way to dissolution. Esrey said the company would move quickly to make a decision about Global One's future.

The equity value of the MCI WorldCom-Sprint merger would be about $115 billion. MCI WorldCom would assume about $14 billion in debt and preferred stock, for a total deal value of about $129 billion. The new company would have to take $102 billion of charges against earnings over 20 years.

Under the terms, Sprint stockholders would receive between 0.94 and 1.2228 shares of MCI WorldCom stock for each Sprint share they own. Assuming the average trading value of MCI stock before the deal closes is between $62.15 and $80.85 a share, the deal would value Sprint shares at $76. But if MCI stock moves outside that range, Sprint shareholders could receive more or less than $76.

For the separate Sprint PCS tracking stock, MCI WorldCom would issue a new tracking stock, swapping one new share for one old share. In addition, owners of the tracking stock would get a bonus of 0.1547 shares of MCI WorldCom common stock for each share they own.

Today, Sprint shares fell $2, to $58.87 1/2; Sprint PCS fell $4.68 3/4, to $74; and MCI WorldCom fell $3.68 3/4, to $67.93 3/4.

The premium MCI WorldCom is paying Sprint stockholders vindicates Esrey's strategy of waiting out the merger mania gripping the telecommunications industry, resisting suitors on the theory that Sprint's value would only rise.

But for MCI WorldCom, the deal fills a desperate need for a wireless network with Sprint PCS, a national, all-digital system.

As Ebbers took the stage at the news conference today, he was clearly relieved that his company will gain a presence in the wireless world, quipping, "I guess the one question I won't be asked today will be `What are you going to do about cellular?' "

Staff writer Justin Gillis contributed to this report.

JOINING FORCES

The combined long-distance reach of MCI WorldCom and Sprint still trails AT&T's market share of nearly half.

Long-distance market share

AT&T: 48%

MCI WorldCom and Sprint: 30%

Other: 22%

Breakout of combined 1998 revenue of MCI WorldCom and Sprint

Voice: $35 billion, 73%

Data: $6 billion, 12%

Internet: $2 billion, 5%

Wireless: $1 billion, 3%

Other: $3 billion, 6%

Total: $47 billion (approximate)

NOTE: Numbers rounded

SOURCES: Bloomberg News, the companies, Hoover's

TOP 10 TELECOM MERGERS

Date announced: Yesterday*

Buyer: MCI WorldCom

Target: Sprint

Value of deal (in billions): $129.00

Date announced: 5/11/1998*

Buyer: SBC Communications

Target: Ameritech

Value of deal (in billions): 72.36

Date announced: 7/28/1998*

Buyer: Bell Atlantic

Target: GTE

Value of deal (in billions): 71.32

Date announced: 1/18/1999

Buyer: Vodafone Group Communications

Target: AirTouch Communications

Value of deal (in billions): 65.90

Date announced: 6/14/1999*

Buyer: Qwest Communications

Target: US West

Value of deal (in billions): 48.48

Date announced: 10/01/1997

Buyer: WorldCom

Target: MCI Communications

Value of deal (in billions): 43.35

Date announced: 2/20/1999

Buyer: Ing. C. Olivetti

Target: Telecom Italia (IT Treasury)

Value of deal (in billions): 34.76

Date announced: 4/22/1996

Buyer: Bell Atlantic

Target: Nynex

Value of deal (in billions): 30.79

Date announced: 4/01/1996

Buyer: SBC Communications

Target: Pacific Telesis Group

Value of deal (in billions): 22.42

Date announced: 8/16/1993

Buyer: AT&T

Target: McCaw Cellular Communications

Value of deal (in billions): 16.70

*Pending ; others completed

SOURCE: Thomson Financial Securities Data