WorldCom, Sprint call off $120 bn deal

WorldCom, Sprint call off $120 bn deal
Ian Simpson

NEW YORK, JULY 13: Long-distance telephone powerhouses WorldCom Inc and Sprint Corp cancelled their $120 billion merger plan on Thursday following regulatory complaints. The break-up of the merger between WorldCom, the No 2 US long-distance company, and No 3 Sprint is likely to make the telephone companies attractive takeover targets.

The deal's demise was widely expected. The US Justice Department moved to block it two weeks ago in its biggest merger challenge ever, and the European Union also sought to halt it. Regulators feared that the merger would cripple competition in the Internet and long-distance telephone markets.

In a statement, WorldCom chief executive and president Bernard Ebbers said the benefits of the merger had been "clear and compelling." Federal regulators' opposition adds to policies that "ultimately will reduce innovation and choice, and raise the cost of telephone services, for residential customers, particularly those in rural America," Ebbers said.

The merger plan had sparked controversy from the moment it was announced in October. Federal Communications Commission Chairman William Kennard initially said the combination would represent a "surrender" from the robust competition that had driven down the cost of long-distance calls for consumers.

WorldCom and Sprint could become attractive takeover targets for international companies such as Deutsche Telekom AG and Nippon Telegraph and Telephone Corp, analysts said. The foreign companies are trying to get footholds in the US market, the world's biggest. WorldCom also could shed its consumer long-distance business and focus on the more lucrative business of providing data, Internet and international communications services to corporations, sources have said.