MCI gives Internet business to Cable & Wireless

By Denise Pappalardo
Network World Fusion, 5/28/98

Bowing to regulatory pressure, MCI Communications Corp. announced this morning that it's handing over its Internet business to Cable & Wireless plc. for $625 million in cash.

Now, the London based Cable & Wireless, which has no substantial Internet assets to speak of, will hold a leading position in the worldwide Internet marketplace, second only to WorldCom, Inc.

While speculation arose last week that MCI was trying to sell parts of its Internet business to calm regulatory opposition of its merger with WorldCom, a statement earlier this week from the European Commission (EC) squashed any beliefs that a partial sale would be satisfactory.

The European Commission, the equivalent of the U.S.'s Federal Communications Commission, said in a statement Monday that "any overlap between WorldCom and MCI should be eliminated without any doubt."

Bert Roberts, MCI's chairman, addressed this issue in a release prior to the company's official press conference this morning. "By divesting MCI's Internet backbone, we have eliminated any overlap with WorldCom's Internet business," he said.

"A partial sale of Internet assets will not be enough to address our concerns and will not solve the problem of Internet dominance," said Peter Thonis, vice president of external communications at GTE Corp. MCI is holding on to its 1,300 customers, which is not a total divestiture, he said. When BBN Corp. and UUNET Technologies, Inc. were sold all of their customers and employees were part of the deal. That is not the case with MCI's deal with Cable & Wireless, he said.

All of MCI's customers and more than 300 point-of-presence sites on its OC-12 Internet backbone network will be supported by Cable & Wireless.

In addition to the raw assets, Cable & Wireless is getting "certain" members of MCI's Internet engineering, marketing and sales staff and a guaranteed amount of revenue and traffic based on the deal. The exact figures are not yet available.

And to snuff out concerns that MCI will simply move customers to one of WorldCom's Internet networks when that deal becomes final, MCI has stated that all of its existing residential and commercial Internet customers will be supported on Cable & Wireless' network for a minimum of two years.

MCI and WorldCom believe that the European Commission, Justice Department and the FCC will approve its merger this summer. MCI's deal with Cable & Wireless is also subject to approval by these regulatory bodies and is expected to become final this summer.