Sprint may disconnect
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July 4, 2000: 9:41 a.m. ET
Pulling plug on WorldCom merger could open way for Deutsche Telekom bid
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NEW YORK (CNNfn) - Sprint Corp. may pull the plug on its $119 billion merger with WorldCom Inc. as early as this week, opening the door for Deutsche Telekom AG to launch its own bid for Sprint, according to published reports citing people familiar with the deal.
The German telecom is preparing a $110 billion bid for Sprint Corp. (FON: Research, Estimates) if the company decides to terminate its union with WorldCom (WCOM: Research, Estimates), the Wall Street Journal said Tuesday. In June, the U.S. Department of Justice sued to block the Sprint-WorldCom merger on antitrust grounds that all but destroyed the merger.
Ending the merger would free Sprint to talk to Deutsche Telekom. The Sprint-WorldCom pact contains a "no-shop" clause requiring Sprint to pay WorldCom $2.5 billion if it holds merger talks with any other party before its merger agreement with WorldCom ends, the Journal said in its online edition.
However, Deutsche Telekom still is hung up on Qwest Communications International Inc. and is considering a deal there, the Journal reported. BellSouth Corp., (BLS: Research, Estimates) the Atlanta-based regional phone provider, also is considering a bid for Sprint and contacted the company last week, the Journal said, citing people close to the situation. Sprint declined to discuss any deal until its merger with WorldCom has terminated.
In June, Deutsche Telekom, with a war chest of nearly $100 billion, made clear its intent to acquire a U.S. telecom company.
However, the German telecom is stepping carefully because it doesn't want a replay of a takeover fiasco that occurred following abandoned bid talks with U.S. carrier Qwest Communications International in March and an aborted merger with Telecom Italia last year. U.S. West Inc. threatened legal action when Telekom made a bid for Qwest after a merger accord was settled between the companies.
Deutsche Telekom also faces political and regulatory hurdles if pursues Sprint. On Friday, 30 U. S. Senators signaled their opposition to a Sprint-Telekom merger, calling any bid by a foreign government-owned company contrary to U.S. law. The German government currently owns 59 percent of Deutsche Telekom.
A Deutsche Telekom spokesman said the government is selling shares in the company and has no say in its daily affairs, the Journal reported.
Deutsche Telekom may be looking for other partners, and a deal with Qwest (Q: Research, Estimates) would not raise nearly as many regulatory considerations. A merger with Sprint, the nation's No. 3 long- distance carrier, has produced strong objections while an acquisition of upstart Qwest would not, the Journal said.
Qwest offers a state-of-the-art network and also owns a 44 percent stake in KPN-Qwest, a Netherlands-based joint venture created to build a high-speed data network, that make it attractive, published reports said.
On Monday, Sprint rose 5/16 to 59-13/16 while WorldCom closed down 3/4 at 45-1/8.
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