DOJ files lawsuit to block WorldCom-Sprint Merger

Published June 27th, 2000 - 02:00 GMT

The Department of Justice (DOJ) today filed a lawsuit to block the planned merger of WorldCom Inc. and Sprint Corp., alleging the combination would reduce competition in telecommunications and result in higher prices for consumers. Simply put: the world will be a better place if you two keep fighting it out.  

"This merger threatens to undermine the competitive gains achieved since the Department challenged AT&T's monopoly of the telecommunications industry 25 years ago," Attorney General Janet Reno told the media on Tuesday. 

"It is critical to our economy that we preserve competition for services that so many of us rely upon in our everyday lives -- long distance calls, data network services and Internet connections."  

Both companies said they are considering their options.  

The lawsuit, filed in US District Court in Washington, DC, seeks a permanent injunction to stop the $129 billion merger. The suit follows a lengthy DOJ review that found the new company would violate antitrust laws. "If WorldCom were allowed to acquire Sprint, large and small businesses and millions of individual customers would have to pay higher prices and accept lower service quality and less innovation," said Joel Klein, assistant attorney general of the DOJ's antitrust division. 

By themselves WorldCom and Sprint are the only real competitors to AT&T and each other, the DOJ said, noting that each has built global fiberoptic networks, developed sophisticated customer account systems and amassed huge workforces. That, says Sprint, would help consumers, not hurt them.  

 

"The merger would create a more complete and effective competitor, not only against the megabucks and AT&T, but against foreign telecommunications companies as well," J. Richard Devlin, executive vice president and general counsel for Sprint said in a statement. 

"We also are disappointed that we've been unable to convince the Justice Department to look at the dramatic changes occurring in the telecommunications market and not be swayed by 1998 market share data [the latest year for which full data was available]."  

A brief WorldCom statement said, "WorldCom was advised today that the US Department of Justice intends to file suit to block WorldCom's proposed merger with Sprint. WorldCom will promptly review its options with Sprint." 

The company had no further comment, a spokesman said.  

The DOJ suit said the planned merger would break antitrust laws in many telecommunications markets, including long distance services sold to US consumers; Internet backbone services; international long distance and private line services between the US and dozens of other countries; data network services to large US businesses; and custom network services for large US corporations.  

"Other carriers have entered the market on a much smaller scale," Klein said. "But none has produced beneficial effects on competition in magnitude to the effects produced by competition between WorldCom and Sprint, and between those companies and AT&T."  

 

The Washington Post reported today that a breakdown of the $129 billion deal would dash WorldCom's plan to take control of Sprint's long distance business and its national wireless network. 

With that plan dead at the Justice Department -- as well as the European Commission -- the companies were considering splitting up Sprint in the hopes that a scaled-down deal would meet the approval of US and European regulators. 

WorldCom would get Sprint's wireless business and Sprint's long distance and Internet divisions would be sold elsewhere, the Post said.  

Two weeks ago, Sprint Chairman William Esrey said the DOJ was "seriously" considering nixing the merger and there have been signs all along that the US government and European Commission had reservations about such an enormous merger since the beginning -- (Albawaba.com)

© 2000 Al Bawaba (www.albawaba.com)

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