MCI, which is looking to close its $37 billion sale to WorldCom, began discussions several weeks ago with Williams, an energy company that also has a stake in the communications industry, to sell MCI's domestic wholesale Internet business, a source told CNET's NEWS.COM.
Williams, which operates an 11,000-mile network of fiber optics, rents out use of its backbone to Internet providers looking for broadband service. The Oklahoma-based company engaged in serious discussions with MCI about acquiring its domestic backbone, but those talks were terminated during the past few days, the source said.
"I don't think price was the issue. It was the specific components of the deal," the source said, declining to elaborate further on why the discussions were halted.
MCI was looking at a price tag of around $500 million for its backbone operations, but that figure could be revised up or down by several hundred million dollars based on terms of the deal and the degree to which MCI's operations fit with the acquirer's business, the source said.
Gil Broyles, a spokesman for Williams, said the company is "not currently involved with any discussions with MCI regarding its Internet business," but declined to confirm whether Williams previously had held discussions with the nation's second largest long-distance company.
Jim Monroe, a spokesman for MCI, declined to comment on the company's reported efforts to divest itself of some of its Internet business.
The divestiture would strengthen the case to allow WorldCom to keep UUNet Technologies, the largest Internet backbone supplier. UUNet was acquired by WorldCom in 1996 when it bought MFS Communications for $14 billion in 1996.
The New York Times reported this morning that MCI is interested in selling its domestic wholesale and trans-Atlantic Internet business, but wants to retain its retail Internet operations. Citing sources familiar with the talks, the Times reported that those approached to bid on parts of MCI's business included British Telecommunications, IXC Communications, and Williams.
British Telecom holds a 20 percent stake in MCI, but was outbid by WorldCom to buy the company. However, the British company still stands to collect $7.3 billion in cash for its existing interest in MCI should the WorldCom deal win regulatory approval.
Reuters contributed to this report.