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WorldCom-MCI wins conditional OK

The EU grants conditional clearance for MCI and WorldCom's proposed $37 billion merger, pending the sale of MCI's Net arm.

The European Commission, Europe's regulatory governing body, today granted conditional clearance for MCI Communications and WorldCom's proposed $37 billion merger, pending the sale of MCI's Internet business.

The decision clears a major hurdle faced by MCI and Worldcom in a bid for an approval of their $37 billion merger, one of the largest in telecommunications.

The commission found that the combined telecommunications companies would control too large a share of Europe's Internet connectivity market.

"WorldCom is currently the leading player in the market, with MCI one of its main competitors. The merger would have given the combined entity a market share of some 50 percent of the relevant market," the commission said in a statement today. "The parties have committed to divesting MCI's Internet assets, thus eliminating the overlap with WorldCom's Internet business."

The commission added: "The timetable for divestiture would allow the parties the opportunity, subject to clearance from [the Justice Department] and the commission, to agree to a sale in advance of, but conditional on, the merger."

MCI had last month agreed to sell its wholesale Internet to Britain's Cable & Wireless for $625 million.

MCI rival GTE seemed gratified with the commission's decision, appeasing its antitrust concerns.

"We are pleased that the European Commission is requiring a complete divestiture of MCI's entire Internet business, both wholesale and retail customers, as a remedy for the threat of monopolization posed by the WorldCom-MCI merger," said William Barr, GTE's executive vice president and general counsel.

GTE, however, maintained that the safeguards must be placed to ensure that a combined WorldCom-MCI does not capture back MCI's Net customers who also currently buy other MCI services.

"Until GTE is satisfied that the necessary safeguards are in place, moreover, GTE will continue to pursue the Internet claims raised in its pending lawsuit challenging the WorldCom-MCI merger," Barr said.

GTE added that the ruling did not address the "serious competitive problems" caused by this deal in long distance markets, where MCI and WorldCom are the second- and fourth-largest carriers.

In light of the usual close cooperation between the European Commission and the Justice Department, WorldCom, and MCI expect the DOJ to complete its antitrust review shortly.

The two companies anticipate closing the merger this summer, after a final regulatory approval by the Federal Communications Commission.

WorldCom shares were up more than 2 percent, trading at $51.44. The stock has reached as high as $50.56 and as low as $28 during the past 52 weeks. MCI shares were at $62.56, up more than 2.5 percent. They have traded as high as $61 and as low as $27.31 during the previous 52 weeks.