WorldCom’s bold offer to buy MCI Communications for $29.4 billion, outbidding British Telecom, could set off a fresh scramble by the world’s telecommunications giants for marriage partners.
Until now, large carriers have tried with limited success to build business empires offering customers a range of services on one bill, from local- and long-distance phones to Internet access to business data networks.
But a combined WorldCom-MCI, if the deal gets approval, would leap-frog far larger rivals by selling all-in-one services to an area covering 70 percent of U.S. business customers.
While the deal is far from certain, the mere prospect could spur others to follow suit, several analysts said last week. Up to now, many telecommunications mergers have involved sellers of similar services, such as Bell Atlantic Corp.’s $25.6 billion combination with Nynex Corp. and SBC Communications Inc.’s purchase of Pacific Telesis Group for $16.7 billion. Both deals between regional phone companies were completed this year.
And in its offer for MCI, British Telecom has little U.S. presence, counting instead on helping MCI muscle its way into new markets such as local phone service.
“I believe you are going to see other acquisitions follow this one,” said Tom Jenkins, an industry consultant with TeleChoice Inc., based in Verona, N.J.
“The old saying is, ‘Lead, follow or get out of the way,”’ said Jeff Sadler, an industry analyst with Atlanta-based Robinson-Humphrey, a unit of Smith Barney.
One company feeling more pressure, some analysts say, will be AT&T.; The nation’s largest long-distance company has been looking for a way to widely sell local service more quickly than entering new markets on a piecemeal basis, by negotiating with individual Baby Bells.
AT&T;, in a statement, noted that the WorldCom deal was far from done and that “WorldCom’s latest play doesn’t affect our strategy in the least.”
Also named as a potential target is GTE, one of the nation’s largest local phone companies, which would give carriers such as AT&T; and Sprint, the No. 3 long-distance company, access to a vast market of local customers.
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