WorldCom-Sprint merger deal may be blocked

WASHINGTON, MAY 18: Washington federal antitrust enforcers have recommended that WorldCom Inc's 115-billion buyout of Sprint Corp be bloc...

WASHINGTON, MAY 18: Washington federal antitrust enforcers have recommended that WorldCom Inc8217;s 115-billion buyout of Sprint Corp be blocked because it would violate antitrust law, lawyers and industry executives said. Concluding a six-month investigation, these officials forwarded a formal recommendation to the Justice Department8217;s antitrust chief Joel Klein who has not yet taken a position on the transaction.

Long-distance telephone companies WorldCom and Sprint said on Thursday they remain confident their 115 billion merger will win regulatory approval despite published reports that antitrust officials believe the deal would harm consumers and should be blocked.

Debt-market sources said WorldCom may have to delay its minimum 3.5 billion four-part bond sale following the reports. The Washington Post said Stephen Axinn, the prominent antitrust lawyer hired by the Justice Department to head the merger review, has expressed deep concerns about the deal.

The Wall Street Journal quoted lawyers and industry executives as saying federal antitrust officials had recommended that the deal be blocked. The officials have quot;forwarded a formal recommendation to the Justice Department8217;s antitrust Chief, Joe Klein, who has not yet taken a position on the transaction,quot; according to the report.

Sources familiar with the situation told Reuters it was premature to say that a formal recommendation had been made by Justice Department staffers since the companies are still presenting their case in meetings with the government. Meetings between top company officials and Klein will beheld in the next few weeks, the sources said.

WorldCom and Sprint said they remain confident the deal will close and declined to comment on the status of discussions with US and European regulators. The companies already have offered to shed Sprint8217;s Internet backbone to ease concerns about the combined companies8217; dominance in that market. WorldCom has been adamant against shedding its prized UUNET Internet unit.

The deal also faces intense scrutiny over the companies8217; long-distance market share. The deal would combine the No 2 WorldCom and No 3 Sprint US long-distance telephone companies.

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The Washington Post said sources close to the companies acknowledged that WorldCom and Sprint had failed to anticipate the degree to which long-distance concerns could complicate their merger. The companies are exploring concessions to win regulatory approval, the sources said.

quot;If you look at all the changes that have happened in the long-distance market 8212; from the regulatory arena, to the way technologies have changed and the way the competitive landscape has changed 8212; all that stuff when taken into account proves in our view that the merger should be approved,quot; a WorldCom spokesman said.