WorldCom, Sprint Call Off Merger

N E W  Y O R K, July 13, 2000 -- WorldCom and Sprint called off their planned

$129 billion telecommunications merger today in the face of

extreme opposition from regulators in the United States and Europe.

In a statement, the companies said that “the set of conditionsultimately demanded by the U.S. Department of Justice wouldcompromise the customer and financial benefits of the merger.”

Late last month, Attorney General Janet Reno announced theJustice Department was suing to block the deal. WorldCom and Sprintthen pulled their merger application in Europe, although it too wasultimately rejected.

DOJ: Americans Would Pay More

The Justice Department contended that the merger of the second-and third-largest long-distance carriers would leave millions ofAmericans paying more for less service.

Mario Monti, competition commissioner for the Europeancommission, had said the merged company would sharply reducecompetition for Internet connections.

Both companies had been widely expected to drop their mergerproposal, and in fact had been hinting at it for the past severaldays.

At a wireless communications conference Tuesday in New Orleans,WorldCom president and chief executive Bernard Ebbers was asked ifhe had anything to report on the merger and whether it was stillmoving forward.

“No,” Ebbers said. “I don’t think there is much left to discuss.”

Litigation Not a ‘Realistic Alternative’

Sprint called the failed deal “an exceptional opportunity tocreate a broad-based international competitor.”

“While we disagree with the conclusions reached by the JusticeDepartment on the competitive impact of the merger, litigation ofthose conclusions in federal court is not a realisticalternative,” the Westwood, Kan.-based company said.

Both Sprint and the Clinton, Miss.-based WorldCom said theDepartment of Justice had informed them it would not be able to goto trial before January 2001. Even if the companies were successfulin that trial, approval by the Federal Communications Commissionand the European Commission would still be needed — and that delaywas too much.

“Given the competitive nature of the marketplace, prolongeddelay and uncertainty would not be in the best interest of ourshareholders, employees or customers,” Sprint said.

In a separate statement, WorldCom’s Ebbers reiterated acriticism he made Tuesday that the government — in particular theFCC, led by William Kennard, and the Department of Justiceantitrust division, headed by Joel Klein — was unnecessarilyinterfering in the marketplace.

“The benefits of this merger were clear and compelling.Opposition to this merger just adds to the list of Kennard-Kleinpolicies that ultimately will reduce innovation and choice, andraise the cost of telephone services, for residential customers,particularly those in rural America.”

Other Merger Opportunities Arise

The decision to call off the merger frees up both companies topursue other merger opportunities. One possible partner: DeutscheTelekom AG, which has been rumored to be eyeing both WorldCom andSprint as possible targets.

Deutsche Telekom declined to comment on the news. “We arewatching how the market develops, but we do not comment on whatother companies are doing,” spokesman Hans Ehnert said.

Shares of both companies have fluctuated wildly over the pastseveral days as speculation about their fate unfolded. OnWednesday, Sprint fell 50 cents to $47.50 on the New York StockExchange after trading in the $60 range for much of last month.Shares of WorldCom rose 6.25 cents to $44.50, after trading as lowas $37.25 three weeks ago.