Justice Department officials said
they have approved WorldCom's $37
billion purchase of MCI Communications
because MCI has agreed to sell its Internet business.
In statements issued today, the Justice Department and MCI confirmed earlier
reports that MCI would sell its entire Internet holdings to Britain's Cable & Wireless for $1.75 billion. In
May, MCI said it would sell only its wholesale Internet business to C&W for
$625 million, a divestiture critics said did not go far enough.
The approval brings the merger of the two telecommunications giants one
step closer to being completed. Last week, the European Commission signed
off on the deal on the same divestiture condition. That leaves the Federal Communications Commission as the
only hold out.
"We have fully addressed the antitrust concerns of the U.S. Department of Justice and look forward to gaining final regulatory approval from the Federal Communications Commission," said MCI Chairman Bert Roberts.
MCI said its Internet business is expected to generate revenue of about $375 million this year. The deal calls for Cable & Wireless to acquire MCI's retail Internet business, which means C&W will get about 1,300 Internet service provider customers and 3,300 Internet access corporate accounts.
"MCI's agreement with Cable & Wireless has no immediate impact on MCI's Internet customers," MCI said in a statement. "They will continue to receive Internet service from MCI until the close of the MCI-WorldCom merger, when the agreement with Cable & Wireless becomes effective. At that time, they will become Cable & Wireless Internet customers."
The Justice Department, which has been scrutinizing the proposed merger
since it was announced, said it had been concerned that the deal could harm
competition among Internet "backbone" companies, which provide high-capacity Net connections for Internet service providers, public and private institutions, and corporations.
"The merger as originally proposed would have given WorldCom/MCI a
significant proportion of the nation's Internet traffic, giving the company
the ability to cut off or reduce the quality of Internet services that it
provided to its rivals," said Joel Klein, who heads the Justice
Department's antitrust division.