Speculation circulated last week that MCI WorldCom Inc. and Sprint Corp. were in merger talks, following published reports that linked the two companies.
Neither company would comment on the reports.
Meanwhile, MCI WorldCom closed on its acquisition of SkyTel Friday.
Both MCI WorldCom and Sprint long have been the subject of merger speculation. MCI WorldCom is said to be looking for an acquisition that would fill its need for a nationwide wireless presence, while Sprint has been linked to Deutsche Telekom and other international carriers as a possible acquisition target.
A combined MCI WorldCom/Sprint would control about one-third of the U.S. long-distance market, second to AT&T Corp., which controls about half of the market. More importantly, a combination of the two would possess many of the key telecommunications ingredients necessary to compete with AT&T nationally, including in the wireless arena.
“My view is that the deal would be a home run for both companies if it were to happen,” said Guy Woodlief, analyst at Prudential Securities Inc. “It strategically would fill a void in WorldCom’s overall portfolio, which is facilities-based wireless.”
Woodlief said other bidders could emerge for Sprint, including Deutsche Telekom or France Telecom, which together are in an international joint venture with Sprint called Global One.
Published reports indicate if a deal was struck between MCI WorldCom and Sprint, the combined company likely would issue a new tracking stock for Sprint PCS to distance the unprofitable wireless business from the parent company and keep it from affecting earnings.
MCI WorldCom earlier this year held talks with Nextel Communications Inc. about a possible combination, but negotiations between the two failed.
Analysts also have speculated MCI WorldCom might look to consolidate the U.S. Global System for Mobile communications market to achieve the nationwide wireless footprint it needs to compete with AT&T.
A tie-up of Sprint and MCI WorldCom could face tight regulatory scrutiny.
Commenting on the MCI/WorldCom merger, FCC chairman William Kennard last year said, “Once this merger is consummated, the industry will again be poised just a merger away from undue concentration. I dare say that any subsequent merger-of this or similar magnitude-between long-distance firms in the near future should be judged quite differently than the merger before us today.”
Analysts speculated the companies would have to divest certain Internet backbone properties in order to win regulatory approval for a combination.
A marriage of Sprint and MCI WorldCom would put pressure on Deutsche Telekom. The German carrier wants a strong presence in the United States, and rumors have circulated the company has looked at merging with Sprint or Qwest Communications International Inc. to enter the U.S. market.
