British telecommunications carrier Cable & Wireless PLC has dropped a lawsuit it filed last week against MCI Communications Corp., a company spokesman confirmed today. The proposed lawsuit would have sought to force the U.S. telecom operator to follow through on an earlier agreement to sell its wholesale Internet backbone business to C&W.
The British telco, which signed an agreement with MCI to acquire part of its Internet backbone business for $625 million in cash in late May, sought an injunction to hold MCI to its agreement in a U.S. District Court in Washington, D.C. last week.
MCI reacted with surprise to the C&W lawsuit, claiming that the deal was still set to go through. Two days later, a judge refused to grant C&W a restraining order against MCI that would have forced the U.S. company to comply with the original deal.
Initially, the deal between MCI and C&W was meant to open the door to European Commission approval of the proposed $37 billion MCI-WorldCom Inc. merger. The Commission has repeatedly voiced concerns that the merger would create an anti-competitive megalith in the Internet backbone market, while MCI and WorldCom hoped that selling off part of MCI's backbone business to C&W would appease regulators. However, a week after the deal was announced, Competition Commissioner Karl Van Miert expressed doubts that the partial sell-off would be enough.
Worried that MCI would try to back out of the deal since it was clear it wasn't going to appease European regulators, Cable & Wireless filed the suit in the U.S. last week to make sure that MCI would stick to its original promise, the C&W spokesman said today. However, C&W is now confident the deal can be consummated without legal pressure, he added.
"We have been continuing to talk with MCI and we have agreed on an acceptable procedure," the C&W spokesman said. "We were happy to withdraw the remaining legal action."
Rumors have spread over the past week that MCI is seeking another buyer or buyers for the remaining parts of its Internet business -- including its customer base of 3,000 corporate Internet access accounts and several hundred thousand consumer accounts -- in order to speed up European Commission approval of the MCI-WorldCom merger. However, MCI has yet to confirm such speculation. Cable & Wireless was also concerned that MCI was perhaps considering opening the door to other bidders for the wholesale part of its Internet business that C&W had already agreed to buy.
Asked whether C&W would seek to purchase other parts of MCI's Internet business should they go on the auction block, the C&W spokesman said the company would "look at what's on offer, though right now it's unclear what that will be."
MCI and WorldCom have until today to submit a new offer to the European Commission, which could include plans to sell off MCI's entire Internet business, but may also stick with the most recent initiative that centers on the C&W deal, a Commission spokesman said earlier this week.
MCI and WorldCom met with U.S. and European regulators to discuss the merger last Friday. This afternoon a Competition Advisory Committee is set to give its official opinion on the merger, which will most likely be taken up by the EC as well. The Commission has until July 15 to give a final ruling on the merger.
RELATED LINKS
Cable & Wireless objects to MCI's behind-the-scenes negotiations
Details of the suit. Network World Fusion, 6/11/98.
Apply for your free subscription to Network World. Click here. Or get Network World delivered in PDF each week.
Request a reprint or permission to use this article.
