DEPARTMENT OF JUSTICE ANNOUNCEMENT ON MCI/WORLDCOM MERGER
USIA
20 July 1998
TEXT: DEPARTMENT OF JUSTICE ANNOUNCEMENT ON MCI/WORLDCOM MERGER
(Merger OK if MCI divests its Internet business) (690)
Washington -- The Department of Justice announced July 15 that the
merger between MCI Communications Corporation and WorldCom
Incorporated may proceed after MCI divests its Internet business.
MCI agreed to sell internetMCI to Cable & Wireless plc for
approximately $1.75 billion ($1,750 million). Cable & Wireless,
headquartered in London, is a leading provider of telecommunications
and multimedia communications services, with annual revenues of
approximately $12 billion.
The Justice Department can sue to block the merger if the parties fail
to complete the divestiture before the WorldCom/MCI deal is completed.
The European Commission issued its findings regarding the merger July
8, giving it conditional clearance subject to a divestiture of MCI's
Internet business activities.
Following is the Department of Justice press release:
(Begin text)
U.S. DEPARTMENT OF JUSTICE
JULY 15, 1998
JUSTICE DEPARTMENT CLEARS WORLDCOM/MCI MERGER
AFTER MCI AGREES TO SELL ITS INTERNET BUSINESS
Largest Divestiture of Company in Merger History
WASHINGTON, D.C. -- The Department of Justice today announced that
WorldCom Inc.'s $44 billion purchase of MCI Communications Corp. may
proceed after MCI divests its Internet business. MCI agreed to sell
internetMCI to Cable & Wireless plc for an estimated $1.75 billion,
making it the largest divestiture of a company in merger history.
After reviewing the terms of the proposed divestiture and its likely
impact on the market, the Department concluded that the divestiture
would resolve the Department's competitive concerns about the merger.
Without the divestiture, the WorldCom/MCI merger would have combined
the two leading providers of nationwide Internet backbone service -- a
service that connects various high-capacity computer networks carrying
Internet traffic. Customers of the backbone services include Internet
service providers (such as America Online and Erol's) and private and
public institutions and corporations.
"The merger as originally proposed would have given WorldCom/MCI a
significant proportion of the nation's Internet traffic, giving the
company the ability to cut off or reduce the quality of Internet
services that it provided to its rivals," said Joel I. Klein,
Assistant Attorney General of the Department's Antitrust Division.
"This divestiture benefits anyone who relies on the Internet because
it preserves competition among major Internet service providers.
Consumers will benefit with lower prices, higher quality, and greater
innovation in this dynamic and emerging industry."
The divestiture will be completed before or contemporaneously with the
closing of the merger between WorldCom and MCI. The Department will be
able to sue to block the merger if the parties fail to complete the
divestiture before the WorldCom/MCI deal is consummated.
Both the Department's and the European Union's investigations began in
October 1997 when WorldCom announced its intent to acquire MCI.
Although the two investigations were conducted independently, there
was a high degree of cooperation between the agencies. With the
parties' consent, the agencies shared information with one another.
They also held joint meetings with the parties. In addition, before
announcing its approval of the WorldCom/MCI deal last week, the
European Commission formally requested, through an exchange of letters
pursuant to the 1991 US-EC Antitrust Cooperation Agreement, the
Department's cooperation and assistance in evaluating and implementing
the divestiture proposal, which had been submitted to both the
Commission and the Department of Justice.
"We have enjoyed a close and constructive relationship with the EU in
pursuing our separate responsibilities throughout the investigation.
We look forward to this kind of cooperation continuing beyond this
matter into the future," said Klein.
Attorneys General from ten states -- Florida, Illinois, Massachusetts,
Missouri, New York, North Carolina, Ohio, Pennsylvania, Virginia, and
Wisconsin -- also participated in the investigation.
WorldCom, headquartered in Jackson, Mississippi, is a global
telecommunications company, with 1997 annual revenues of $7.35
billion.
MCI, headquartered in Washington D.C., is the second largest
telecommunications provider in the United States and the fifth largest
telecommunications provider in the world, with 1996 revenues of $18.5
billion.
Cable & Wireless, headquartered in London, England, is a leading
provider of telecommunications and multimedia communications services,
with annual revenues of approximately $12 billion.
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