WASHINGTON-Justice Department antitrust lawyers reportedly oppose the proposed $115 billion merger between WorldCom Inc. and Sprint Corp., a major snag that-if true-could kill the deal and spark bidding wars for top wireless carriers not yet claimed.
The Justice Department did not return calls for comment on published reports that its antitrust staff wanted to block the WorldCom-Sprint deal.
For months, the nation’s capital and Wall Street have been rife with speculation that Justice and the Federal Communications Commission have grown uncomfortable with the prospect of seeing the No. 2 and No. 3 long-distance carriers-firms with substantial Internet backbones-join forces.
If the merger falls apart-which would be one of the very few to do so to date-WorldCom would be back in the hunt for a mobile phone partner. The driving force for the merger is largely WorldCom’s desire to fill a major wireless void by acquiring Sprint’s nationwide digital mobile-phone assets.
Nextel Communications Inc. and VoiceStream Wireless Corp. have been mentioned as possible acquisition candidates for WorldCom, though Nextel’s soaring stock price, heavy debt and limited spectrum position are potential negatives in that regard.
MCI Communications, before merging with WorldCom, walked away from a deal with Nextel several years ago. After the No. 2 long-distance carrier and WorldCom teamed up, WorldCom last year entertained a merger with Nextel but subsequently decided against it.
On the flip side, Sprint PCS could become a takeover target by a foreign telecom firm-like a Deutsche Telekom-desiring a major presence in the United States.
WorldCom and Sprint are pinning hopes of saving the merger on meetings Justice antitrust chief Joel Klein will have in coming weeks with WorldCom Chairman Bernard Ebbers and Sprint Chairman William Esrey.
“When we signed the merger agreement, we knew the government would take the traditional long-distance market and many other factors into account in its consideration of the deal,” said Peter Lucht, a WorldCom spokesman.
He added, “We believe the dramatic changes affecting the telecommunications industry-including technological developments, changes in the competitive landscape and in consumer demand-would lead DOJ to decide that this merger should be approved. We look forward to the opportunity to present the facts and our views to senior Justice Department officials in the next few weeks.”
Sprint and WorldCom issued a joint statement that mirrored Lucht’s remarks. The companies are hopeful Klein will take a broader view of the proposed merger as opposed to the strict antitrust analysis conducted by Justice lawyers.
When they meet Klein, according to a knowledgeable source, Ebbers and Esrey are expected to reiterate their intention to divest Sprint’s Internet backbone and to argue that Baby Bells eventually will become major long-distance players.
To illustrate their point, the two executives may make reference to long-distance strides made by Bell Atlantic Corp. in New York.
