When the U.S. Department of Justice sued Microsoft (Nasdaq: MSFT), some critics screamed about an attack on the American economy.
That's not true, since the main beneficiaries of the DOJ's misguided move happen to be other American companies, such as Sun Microsystems (Nasdaq: SUNW) and Oracle (Nasdaq: ORCL). But it might be true in the next wave of antitrust muscle-flexing.
As an encore following the Microsoft case, federal regulators apparently killed the acquisition of Sprint (Nasdaq: FON) by Worldcom (Nasdaq: WCOM). And who is in the best position to take advantage?
Not AT&T (NYSE: T). Not Qwest Communications (NYSE: Q). Not SBC Communications (NYSE: SBC) or Verizon (NYSE: VZ). Not any of the CLECs or ILECs.
Instead, it's Deutsche Telekom (NYSE: DT), which has sought a bride for years now. Sprint presents the latest matrimonial opportunity.
Joel Klein may disagree, but Sprint obviously believes it can't compete independently in the New World of communications. Otherwise the company wouldn't have agreed to sell itself in the first place.
Leading suspects for Worldcom's replacement include DT and BellSouth (NYSE: BLS). But DT's wallet is bigger -- roughly $200 billion by one estimate. More important from a regulatory point of view, DT, unlike BellSouth, doesn't overlap with Sprint in the United States market.
Which illustrates the silliness of the federal government's stance against Worldcom. The DOJ worries about a combined Worldcom-Sprint wielding too much market power, but there's only one field in which Worldcom-Sprint could dominate: Internet backbone.
It's a legitimate concern, but Worldcom said it would sell Sprint's wholesale Internet business and stick with Worldcom's current data assets, which include UUNet.
That's the real irritant for regulators: Worldcom's already-strong position in the backbone field.
Every time Worldcom tries to close a major acquisition, some government agency asks the company to dump UUNet. The European Union supposedly pushed for that in the MCI deal. U.S. regulators floated the idea again this time around, according to reports.
There's one large problem with the proposal: Worldcom owned most of its backbone assets before it bought MCI. CEO Bernard Ebbers was smart enough to realize the importance of Internet data before it became a booming market.
Now governments want to punish Worldcom for being visionary. If it's really such a bad thing, maybe the DOJ should launch another Microsoft-style antitrust case.
Of course, it's not really so bad. Although UUNet is the largest backbone player, it doesn't come close to ruling its space the way Windows owns the PC desktop.
Worldcom's data business looks even less dominant once you go outside North America. And the only way to examine communications is through a global lens, because the Internet is international, even if it was invented in the United States.
You'd hope the U.S. government would do everything possible to give American companies an edge in multinational competition. Instead, we have a situation where the third-largest U.S. communications firm may be owned by Germany's national phone company.
Granted, with Deutsche Telekom -- which failed in attempts to buy Telecom Italia and Qwest -- no acquisition plan is ever guaranteed. And the latest reports have DT eyeing the British firm Cable & Wireless (NYSE: CWP) or even taking another run at Qwest, rather than going after Sprint.
But regardless of DT's plans, the reality remains for Sprint and other U.S. companies: government opposition to Worldcom means the richest potential communications suitors are overseas telecom firms, all of which already command monopoly power in their own countries.
It's a strange way to protect U.S. economic interests. 22GO>