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Who will buy MCI's Net assets?

That is the question as the European Commission grants conditional clearance for the proposed merger with WorldCom.

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

The question now on everybody's mind is who will buy MCI's Internet assets.

After the two telcos agreed in May to sell MCI's wholesale Internet to Britain's Cable & Wireless for $625 million, they were forced to try to revise the sale so it would include other Internet assets in order to win European competition chief Karel Van Miert's blessing.

"MCI is not in a position to comment on potential buyers, or on the status of any transactions," said MCI spokesman Jim Monroe. "Because discussions are continuing with the [Justice Department] and other regulatory bodies, it's premature to talk about any specifics."

With MCI and WorldCom eager to consummate the merger deal this summer, Internet companies might be hoping for a fire sale.

"That might be the case if they had only one bidder," said Charles DiSanza, an analyst with investment banking firm Gerard Klauer Mattison. "But I think a lot of people are interested."

"Cable & Wireless wanted the whole thing and they also wanted to have an exclusive on the second half of the deal," DiSanza added, noting that PSINet is one company rumored to be interested in buying MCI's Internet assets.

"This would be very good for [PSINet]," said DiSanza. "They are a great Internet company in their own right, and they just raised $600 million. They've got money burning a hole in their pockets."

"We have been recognized as a candidate group that would appease the concerns that the EU has," said PSINet spokesman Mike Binko. "But we are not confirming or denying that we are a potential buyer."

While MCI rival GTE seemed to approve of the commission's decision, the company said it will continue to pursue certain claims it put forth in its pending lawsuit that challenges the WorldCom-MCI merger.

"We are not interested in pursuing MCI's assets," said GTE spokesman Bob Bishop. "That is not why we are pursuing the lawsuit."

GTE says that safeguards must be implemented to ensure that a combined WorldCom-MCI does not recapture MCI's Net customers, who currently also buy other MCI services.

One possible remedy would be for MCI to sell its assets to several players rather than just one.

"[The Internet assets] could be sold off individually, since [MCI] thought they could sell the backbone individually," said DiSanza. "PSINet doesn't need the backbone, they already have a terrific backbone."

In late afternoon trading, WorldCom shares were up more than 1 percent, at 51.02. The stock has traded as high as 50.56 and as low as 28 during the past 52 weeks. MCI's stock was at 61.57, also up more than 1 percent. The shares have traded as high as 61 and as low as 27.31 during the previous 52 weeks.