Andrew Osborn in Brussels 

Brussels to scupper £80bn deal

Speculation that the European commission will block the £80bn mega-merger between MCI Worldcom and Sprint reached fever pitch yesterday ahead of a meeting of competition law experts in Brussels today, which is expected to reject the deal.
  
  


Speculation that the European commission will block the £80bn mega-merger between MCI Worldcom and Sprint reached fever pitch yesterday ahead of a meeting of competition law experts in Brussels today, which is expected to reject the deal.

The EC is known to have serious reservations about the tie-up and is adamant that the merged entity would have a virtual stranglehold on the crucial internet infrastructure market. Would-be competitors would not, it says, have a chance against the merged group.

Mario Monti, the EC's most senior anti-monopoly official, yesterday flew to Washington to discuss the deal and other pressing issues with his American counterparts.

He was due to meet America's top telecoms regulator William Kennard, who heads the federal communications commission, and it is likely the two men will discuss the controversial merger.

The US justice department is expected to decide itself in the next few days whether to approve the deal or not and the EC is likely to be heavily influenced by US thinking on this issue.

The EC has already indicated that it is not happy with the deal as it stands and in February extended an investigation into the matter on the grounds that it had "serious concerns" about the impact the merger would have on internet services and long distance telephone calls.

An EC spokeswoman yesterday confirmed that problems still lingered but declined to speculate on whether they prevent the marriage going ahead. The two firms have already offered to sell Sprint's internet business to appease Brussels but Mr Monti has made no secret of the fact that he wants Worldcom to part with its highly successful UUNet subsidiary.

Industry observers believe, however, that Worldcom would rather dump Sprint at the altar rather than give up UUNet.

Hopes that the deal will be approved by the EC are, according to several US papers, fading fast.

Although the result of today's meeting of experts is not final it is thought that the EC will endorse its opinion when it meets on July 5. The deadline for a final decision is July 12.

It is thought that the career of Bernie Ebbers, the charismatic chairman of MCI Worldcom, hangs in the balance. As someone who has built up a reputation for deal brokering, a failure now would be a serious setback.

The EC does not usually block deals outright though it has enjoyed some success in recent years in squeezing concessions out of merger partners. But there is a feeling in Brussels that Mr Monti is keen to play the tough guy and flex the EC's muscles in the only sphere of policy where it wields immediate and immense power.

If the EC does rule against the merger the two companies could try to appeal against the decision at the European court of justice. That would be slow, however, and wildly unpredictable. The EC warned in February that the merged company would carry 45% of the world's internet traffic which, it argued at the time, was far too much.

 

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