Stripped to its essence, you have to wonder whether euro pride had anything to do with European Commission antitrust chief Mario Monti’s heartburn over the WorldCom-Sprint merger he helped kill. You couldn’t blame him if it did, seeing that the U.S. is the world’s high-tech leader and that there is an undeclared trade war between the United States and the European Union.
For sure, WorldCom and Sprint wield tremendous influence in long-distance and Internet backbone markets.
From all indications, WorldCom and Sprint were willing to shed some assets to assuage U.S. and EU regulators. But the two firms couldn’t concede too much without completely sabotaging the financial viability of the deal itself; that is, WorldCom-Sprint needed enough efficiencies from combined operations and profits from lucrative long-distance and Internet traffic to subsidize Sprint’s prized national mobile telephone network that adds new subscribers as fast as it accumulates debt.
Monti was not alone. Justice Department antitrust czar Joel Klein sued to block the merger last Tuesday.
“Going from the big three telecom companies-WorldCom, Sprint and AT&T-to the big two would be like giving customers the wrong number,” said Attorney General Janet Reno in a banal, scripted statement not unlike others she’s voiced to rebuff recommendations from high-ranking aides to investigate Vice President Gore’s 1996 fund-raising activities.
From an antitrust standpoint, what exactly was the geographic market at issue in the WorldCom-Sprint deal: the continental U.S. or the world? For Monti, the latter; for Klein, the former. Who’s right? In the real world, Monti.
What Europe lacks in high-tech intellectual capital it makes up in industrial policy and in being far more sophisticated about the new global economy than the U.S.
That’s why Europe-in concert with Japan-will lead the world in the deployment of third-generation mobile phone service. The U.S., ever proud of its free market high-tech policy, will be left floundering in a 3G archipelago.
No doubt, Monti will have far less angst over, say, a Deutche Telekom AG-Sprint deal than over an all-American telco merger that was WorldCom-Sprint.
What kept Europe together during the Cold War was the existence of a menacing nuclear foe to the east. In the post-Cold War era, economic unity is the unifying force and defining feature of Europe.
At the same time, Europe remains a historical basketcase of political, economic and social differences. But, judging from its actions at WRC-2000, the EU is capable of acting as one on the world stage.
Finland’s Nokia Corp. and Sweden’s L.M. Ericsson-backed by an EU bureaucratic juggernaut-seem to have positioned themselves for this 3G future. Where does that leave Motorola Inc. and Qualcomm Inc.?
