Feds OK WorldCom-MCI Merger

WorldCom's takeover of MCI Communications Corp., won approval from federal regulators Monday, removing the last hurdle to one of the nation's biggest telecommunications mergers.

The companies promptly closed the $37 billion deal after receiving Federal Communications Commission approval, officials said.

MCI already is the nation's second-largest long-distance company, behind AT&T, and would remain so after the merger with No. 4 WorldCom Inc. of Jackson, Miss.

Still, the new company, to be called MCI WorldCom, would be a behemoth selling a full range of services, from local and long-distance to Internet connections to 22 million customers in more than 200 countries.

For customers, the deal is likely to speed the advent of all-in-one packages of telecommunications services, ranging from long-distance and local telephone to Internet access, on a single monthly bill.

U.S. and Europeans antitrust regulators had approved the deal in July on condition Washington-based MCI sell all its Internet business. MCI also is expected to complete the $1.75 billion sale to London-based Cable & Wireless PLC. upon the FCC approving the merger.

The FCC also conditioned its approval on the sale of MCI's Internet business.

Consumer groups initially opposed the merger, fearing MCI WorldCom might ditch less lucrative residential phone customers and focus on businesses. But their concerns were alleviated after the companies gave the FCC assurances that they wouldn't abandon residential customers.

"That's a major improvement," said Gene Kimmelman, co-director of the Consumers Union's Washington office.

Kimmelman said the companies' commitment also resolves consumer concerns that the merger would stifle competition in the residential phone market, possibly reducing choices for customers and driving up rates. The companies has maintained all along that the merger would boost competition and choice, and probably lower prices.

The FCC concluded that the merger would expand competition, particularly in the local phone business. "This combination of assets may enable the merged company to expand its operations and enter into new local telephone markets more quickly than either company could on its own," the FCC's order said.

The merger, announced Nov. 10, 1997, will be the third biggest telecommunications merger in U.S. history. Only the proposed mergers involving SBC Communications Inc. and Ameritech Corp., valued at $56.6 billion, and Bell Atlantic Corp. and GTE Corp., valued at $52.9 billion, are bigger.

The Justice Department and European regulators feared the merger would crimp competition and possibly raise prices in the Internet "backbone" business. Internet backbones are high capacity networks that carry Internet and other data traffic for third parties.

Between WorldCom's Internet business and MCI's, European regulators had estimated that a combined company wuld have controlled about half the world's Internet traffic.

Rivals GTE and Sprint feared the combined company would dominate the Internet market and called for MCI to sell all its Internet assets.

The combined company, however, would retain WorldCom's UUNet Technologies Inc., a big Internet service provider, which also is in the Internet backbone business.

The FCC also approved transferring MCI's direct-broadcast satellite, or DBS, license to WorldCom. That is the last national license to beam TV programs into U.S. homes via satellite.

WorldCom's winning bid, made up mostly of stock, had leapfrogged a $28 billion cash offer from GTE Corp. and also had thwarted a $24 billion merger agreement MCI had reached with British Telecommunications PLC.

Written By Jeannine Aversa