The European Commission announced that it will extend its review of the planned $118 billion merger of MCI WorldCom and Sprint with an in-depth antitrust investigation.
European concerns that the venture will reinforce the entity's dominance over a number of key services prompted the investigation, particularly as regards high-speed Internet connections, the provision of global telecom services to multinational companies and transatlantic voice traffic.
The investigation gives the Commission four months - until early July - in which to determine whether the venture complies with European Union (EU) rules which ban the creation or reinforcement of dominant positions.
Despite the setback, "MCI WorldCom and Sprint will continue to cooperate fully and look forward to continuing their work with the Commission demonstrating the competitive benefits that the merger will deliver in Europe, the U.S. and around the world," according to a statement issued by the companies.
The primary focus of the EU's investigation is directed at the Internet backbone business where there are only a handful of other global providers. MCI WorldCom offered to divest Sprint's Internet backbone services, but this proved insufficient to quell all the Commission's fears about the elimination of competition between MCI and Sprint in this field, an EU source told IDG.
The Commission acknowledged in its statement that on Feb. 2 the companies had committed themselves to rapidly withdrawing Sprint from the Global One venture, a process which the companies argued would eliminate many of the Commission's concerns.
However, the Commission stated that "given the negligible involvement of Global One in the market for top level Internet connectivity, this undertaking could not remove the serious doubts raised by the notified operation."
Earlier this year Sprint agreed to pull out of Global One, its partnership with France Telecom SA and Deutsche Telekom AG, for $1.13 billion in cash and the repayment of $276 million in debt.
As regards global telecom services to business, the Commission is concerned that if authorized, the current operation together with the Concert alliance would control the majority of the sector. Concert is a joint venture between British Telecommunications PLC and AT&T.
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