Cable & Wireless of the U.K. has filed a lawsuit against MCI WorldCom alleging that the U.S. company has not fulfilled the terms of a contract under which Cable & Wireless bought MCI's Internet business for $1.75 billion.
C&W filed charges in Delaware Federal Court. The lawsuit alleges that MCI WorldCom "failed to effectively transfer MCI's Internet customer base, impeded C&W's ability to operate the Internet business and targeted former MCI Internet customers for marketing purposes," C&W said in a statement released last night by its U.S. subsidiary. The British carrier is seeking "unspecified monetary damages and other relief," the statement added.
As a result of MCI's alleged breaches of agreement, C&W has lost a number of Internet customers, as well as revenue and marketing opportunities, C&W said. In addition, C&W has incurred significant recruiting costs after having to fill positions that MCI failed to transfer under the original agreement, the U.K. company said.
Just as importantly, "the lawsuit charges that MCI WorldCom's breaches of the agreement have harmed C&W's reputation for high-quality service," the C&W statement said.
The U.K. telecom carrier "remains willing to meet with MCI WorldCom to try to resolve differences and reach a negotiated settlement," C&W U.S.A. CEO Denny Matteucci was quoted as saying in the statement.
MCI WorldCom in the U.K. would not comment on the lawsuit and MCI in the U.S. could not be reached for comment.
MCI announced plans to sell its Internet assets last May to C&W for $1.75 billion in order to gain regulatory approval to merge with WorldCom.
The deal called for MCI to transfer the following assets to C&W: MCI's U.S. nationwide Internet backbone; all of its dedicated Internet access customers (including 3,300 major corporate accounts); 1,300 ISP customers; a nationwide dial-up business including more than 250,000 consumers and 60,000 business users; and the company's Web hosting and managed firewall services for more than 100 corporate accounts. Approximately 1,000 MCI employees, including engineers, sales, customer service, marketing, operations and administrative support staff, agreed to transfer to C&W.
While C&W eventually accepted the deal, indications that the British company had misgivings about MCI's ability to hold up its end of the bargain surfaced early on. In June of last year, C&W filed, and then dropped one week later, a lawsuit against MCI that sought to have a court require the U.S. company to comply with the agreement to sell its Internet backbone. C&W feared that MCI would try to back out of the deal if the U.S. carrier faced further regulatory hurdles to its merger with WorldCom. The deal was finally completed that July.
In February, MCI WorldCom announced plans to launch an Internet service in the U.S. through a partnership with America Online's CompuServe division.
