WASHINGTON-While lawmakers and industry executives debated the proposed $130 billion merger between MCI WorldCom Inc. and Sprint Corp.-the largest transaction in history-Senate Judiciary Committee Orrin Hatch (R-Utah) introduced legislation last week to relax regulatory and financial requirements for smaller mergers.
The MCI WorldCom-Sprint deal, largely driven by MCI WorldCom’s desire to add wireless to its mix of bundled services, requires approvals from the Justice Department and Federal Communications Commission.
Even before last Thursday’s Senate hearing, FCC Chairman William Kennard publicly raised concerns about the proposed merger.
Most observers agree that, at a minimum, such a deal would require either MCI WorldCom or Sprint to divest its Internet backbone facilities, given the dominant position each has in that market.
While Hatch did not indicate which way he was leaning, other Judiciary Committee members were more outspoken on the proposed merger.
“I am concerned about the impact of this proposed merger,” said Sen. Mike DeWine (R-Ohio), chairman of the Senate Judiciary antitrust subcommittee. “Unless MCI and Sprint can show this proposed transaction will not harm consumers in the long-distance market, I will not, at least at this time, be able to support this merger.”
Sen. Herbert Kohl (D-Wis.), ranking minority member of the Judiciary panel, said, “Such mergers raise the dangerous possibilities of collusion, price coordination, cartel pricing, and reduction in quality of service.”
MCI WorldCom Chairman Bernard Ebbers, seeking to allay those fears, said the concept of the long-distance market is going away.
“The explosive growth of wireless telephony … has eliminated the artificial distinction between local and long-distance calling,” said Ebbers.
Through cost savings and efficiencies, Ebbers told lawmakers an MCI WorldCom-Sprint combo would provide formidable competition in local and wireless markets, particularly third-generation wireless, to Baby Bells, AT&T Corp. and cable TV monopolies. A big chunk of the latter sector is on track to join forces with AT&T.
All told, Ebbers said an MCI WorldCom-Sprint merger would give the new company more than 4 million personal communications services subscribers and 1.7 million paging/advanced messaging customers.
Sen. John Ashcroft (R-Mo.), a member of the Judiciary and Commerce Committees, said he is inclined to support the proposed transaction. He said the deal offers major economic gains for Kansas City, where Sprint is headquartered.
“It [the merger] promises to be a winner for Missouri,” said Ashcroft. But the Missouri lawmaker added he would reserve final judgment until he examines other issues, including effects on competition in long-distance and other telecom services.
Gene Kimmelman, co-director of the Consumers Union, said telecom merger mania “has just gone too far for consumers.”
