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WorldCom and Sprint cancel deal, blame regulators for breakup

SHARE WorldCom and Sprint cancel deal, blame regulators for breakup

CLINTON, Miss. (Bloomberg) — WorldCom Inc. and Sprint Corp. canceled their $152 billion combination after U.S. and European regulators opposed it on grounds that it would reduce telecommunications competition.

The U.S. Justice Department sued last month to block WorldCom's purchase of Sprint. The companies withdrew a separate merger application with the European Union after Mario Monti, the group's top antitrust enforcer, opposed the accord announced in October. There will be no breakup fees, the companies said.

WorldCom Chief Executive Bernard Ebbers built the No. 2 U.S. long-distance phone company with 75 acquisitions before this one failed. Sprint, the No. 3 U.S. long-distance provider, and WorldCom may be takeover targets now by international companies such as Deutsche Telekom AG, analysts and investors have said.

"While we disagree with the conclusions reached by the Justice Department on the competitive impact of the merger, litigation of those conclusions in federal court is not a realistic alternative," Sprint Chief Executive William Esrey said in a statement. Such a trial wouldn't have started before January 2001, according to the Justice Department, Esrey said.

What May Be Next

Combining the two companies would have created a new one capable of raising prices for business and residential long-distance phone and data services, the Justice Department said. Costs cut by combining the companies' long-distance and Internet operations would have helped offset losses at Sprint PCS, Sprint's U.S. wireless network and the asset Ebbers primarily wanted.

Shares of Clinton, Mississippi-based WorldCom rose 1 5/8 to 46 1/8 in early trading. Sprint, based in Westwood, Kansas, rose 13/16 to 47 13/16. Kansas City, Missouri-based Sprint PCS fell 21/64 to 60 7/8. AT&T, the largest U.S. long-distance company, rose 7/16 to 32 5/16.

Sprint may be pursued for acquisition by foreign companies seeking an American operation, such as Deutsche Telekom, France Telecom SA, Spain's Telefonica SA or Japan's Nippon Telegraph & Telephone Corp., analysts and investors have said.

WorldCom is expected to seek VoiceStream Wireless Corp. or Nextel Communications Inc., mobile-phone companies with U.S. national service coverage, the analysts and investors have said. WorldCom held talks to buy Nextel in May 1999 that collapsed over price, people familiar with the companies said then.

WorldCom also could become a takeover target by a foreign company such as Deutsche Telekom, analysts have said. The company appears open to selling itself if the price is high enough, the Wall Street Journal reported, citing people close to the company.