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MCI spinoff "not good enough"

An EC official says MCI's divestment of its Internet business does not satisfy antitrust concerns in WorldCom's proposed acquisition.

MCI Communications' divestment of its wholesale Internet business is "not good enough" to satisfy antitrust concerns raised by WorldCom's proposed acquisition of the company, the top antitrust official of the European Commission told Bloomberg today.

EC and U.S. officials have scrutinized the proposed deal, and have expressed concern that the merged companies might have an anticompetitive chokehold on Internet backbone services, which connect Internet service providers and other large players to the Internet.

To address these concerns, MCI said early this week that it was selling its backbone business to British carrier Cable & Wireless for $625 million. MCI executives said at the time that they were confident the sale would result in EC and U.S. approval of WorldCom's purchase of MCI, valued at $37 billion.

Speaking to Bloomberg in Brussels today, EC competition commissioner Karel Van Miert said the MCI sale in fact would not address his concerns.

"Some of [MCI's Internet business] is intertwined and interlinked with the normal telecom business," Van Miert explained. "They tried to keep as much as they possibly could, and we said, 'No, that's not what we had in mind.'"

According to the report, EC and Justice Department officials told the companies yesterday that the sale to C&W "was not good enough" to satisfy their concerns.

Van Miert added that if WorldCom had sold its UUNet Internet business, his agency's concerns would have been satisfied.

MCI declined to comment, except to say that it continues "to believe that the sale [of its wholesale Internet business] addresses the only antitrust issues that have been raised." Representatives from WorldCom could not be reached for comment.