A top official with the European Commission confirmed today that examiners for the commission's Competition Directorate-General who have been reviewing the deal on behalf of the European Union have concluded that the merger presented by the companies should not be permitted.
European regulators complain that the merger would result in one company dominating high-level Internet access around the world. The official, speaking on condition of anonymity, said the Europeans believe a proposal by the companies to sell Sprint's Internet assets would not work.
The two companies were not ready to sound the death knell today; neither would discuss the matter publicly. Sources with both companies said the discussions with U.S. Justice Department officials were at a sensitive stage.
European approval of the merger is vital because WorldCom has operations in 65 countries, including substantial assets in Europe.
The Financial Times, a British newspaper, reported today that WorldCom was prepared to dispose of all of Sprint's Internet and long-distance operations--$45 billion in assets--to satisfy U.S. and European regulators.
The EU official could not confirm the report. But he said that, barring extraordinary measures, the merger's prospects appeared bleak.
The commission must make its decision by July 12. EU spokeswoman Amelia Torres, speaking at EU headquarters in Brussels, Belgium, said today the commission likely would make a decision at its July 5 meeting.
In the meantime, the EU's commissioner for competition, Mario Monti, flew to Washington today to inform U.S. officials of his staff's findings. Monti had meetings scheduled Friday with Attorney General Janet Reno, Justice Department antitrust chief Joel Klein and Federal Trade Commission chairman Robert Pitofsky. Klein's own staff recently recommended against the deal because of concerns the companies would dominate U.S. long-distance service and Internet access.
Monti was scheduled to meet tomorrow with ranking members of the Senate Judiciary Committee's subcommittee on antitrust issues, Sens. Mike DeWine, R-Ohio, and Herbert Kohl, D-Wis. And he was to meet with Federal Communications chairman William Kennard on Monday. Kennard has previously said the companies would "bear a heavy burden to show how consumers would be better off."
The EU first voiced "serious concerns" about the effect of the planned linkup on Internet access back in February.
Last week, Sprint chief executive William T. Esrey himself appeared somewhat less confident that the deal would pass muster. He assured shareholders that "if we are prevented from merging," Sprint could continue to thrive on its own.
The merger would create a telecommunications giant with revenue of more than $50 billion, making it one of the world's largest companies. WorldCom and Sprint unveiled the merger plan, a stock-swap deal then valued at $115 billion, last October.
Sprint and WorldCom both stumbled in stock trading today. Sprint fell $1.13, or 1.9 percent, to $59 on the New York Stock Exchange, and WorldCom closed at $40.31 per share on the Nasdaq--down $1.38, or 3.3 percent, from yesterday's close.
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