Cable & Wireless objects to MCI's behind-the-scenes negotiations

By Denise Pappalardo
Network World Fusion, 6/11/98

Cable & Wireless, plc has declared it will not sit quietly while MCI Communications Corp. negotiates with regulators to secure its $37 billion merger with WorldCom, Inc.

Yesterday, Cable & Wireless filed a complaint with the U.S. District Court to seek an injunction and a declaration that will require MCI to comply with its agreement to sell part of its Internet business to Cable & Wireless.

Specifically, the agreement states that if further concessions need to be made so that the European Commission and the U.S. Department of Justice approve the MCI/WorldCom merger, MCI should be making those additional concessions for Cable & Wireless.

"We are simply reminding MCI that they are supposed to be negotiating with us to secure approval," said a Cable & Wireless spokesman.

MCI is surprised that Cable & Wireless filed this complaint, according to an MCI spokesman. The terms of MCI's agreement with Cable & Wireless has not changed, he said.

But that's exactly what Cable & Wireless is concerned about. The London-based carrier believes that MCI is making further concessions and compromises with the regulatory bodies, but Cable & Wireless is not part of these concessions.

MCI and Cable & Wireless last month announced that MCI would sell part of its Internet business, which includes MCI's backbone and all of its wholesale ISP customers, to Cable & Wireless. This deal was made in the hopes that it would clear the way for WorldCom and MCI to merge.

The companies' preemptive strike has not quelled regulatory reluctance to approve the deal. The European Commission stated late last week that the partial sale of MCI's Internet backbone to Cable & Wireless will not clear the way for the MCI/WorldCom merger.

But this does not mean that additional compromises would not do the trick, said Willy Helin, a spokesman for the European Union Delegation of the European Commission in Washington, D.C. The EU wants to ensure that MCI will not be able to take back its wholesale ISP customers once MCI and Cable & Wireless' two-year agreement is said and done, Helin said.

This may mean that a regulatory watchdog will oversee the "divestiture" of MCI's wholesale Internet business to ensure a complete divestiture occurs, he said. But industry watchers believe that MCI may have to give up more, such as its residential Internet access customers. But none of the parties involved would comment on the details of the negotiations with regulators.

And while the EC has stated publicly that if WorldCom sold off UUNET Technologies, its Internet darling, the deal would sail through regulatory approval, WorldCom maintains that selling off UUNET is not an option.