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EC expands MCI review
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March 4, 1998: 9:11 a.m. ET
WorldCom merger raises concerns of effect on Internet services in Europe
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NEW YORK (CNNfn) - The European Commission has decided to conduct an expanded inquiry into the proposed $37 billion telecommunications merger between MCI Communications Corp. and WorldCom Inc.
The Commission said Wednesday it decided to undertake the inquiry after investigations into the deal, which will create a new company called MCI WorldCom, raised concerns about the combined company's market share of Internet backbone services, the main routes through which Internet information is transmitted.
Services the EC said could be affected by the merger include the provision of a network of high capacity, long-distance phone connections that carry data both nationally and internationally, and interconnection with other networks.
While both WorldCom and MCI are U.S. companies, the European Commission has the power to look at any mergers that could hurt competition in the European Union.
As the EU's competition watchdog, responsibility for reviewing such mergers falls on the European Commission. In the past, the EC usually has requested changes or concessions from companies rather than rejecting mergers outright.
The two companies both exceed the benchmark level of annual European sales of 250 million ecus [European currency units], or $272 million, which triggers EU scrutiny.
WorldCom, a long-distance upstart based in Jackson, Miss., said Wednesday it remains "confident" that the Commission eventually will approve the merger.
"WorldCom and MCI will continue to cooperate fully and look forward to continuing their work with the Commission and demonstrating the competitive benefits that the merger will deliver to the U.S., Europe and around the world," the company said.
WorldCom added that it expects the deal to be completed by mid-1998, as scheduled. Shareholders of both companies are set to vote on the merger on March 11.
WorldCom, led by brash Chief Executive Officer Bernard Ebbers, won over MCI in November with its $37 billion deal. WorldCom (WCOM) wrested MCI (MCIC) away from British Telecommunications PLC, which was involved in a joint venture with MCI known as Concert.
WorldCom also had to top GTE Corp.'s $28 billion offer to win MCI, the nation's second-largest long-distance phone service provider.
The European Commission now has an additional four months to make a final decision on the merger and said its decision to broaden its review doesn't necessarily mean the merger won't be approved. The MCI-WorldCom merger is also being reviewed by U.S. regulators.
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