Carriers MFS Communications Co Inc and WorldCom Inc have leapfrogged MCI Communications Corp in size, by agreeing to join forces in a $14bn merger deal. The merged company will have annualized revenues of around $5.4bn and claims over 500,000 business customers spread over North America, Europe, and Asia. Perhaps even more significantly, the combined company – to be known as MFS WorldCom – will have a major headstart in offering users one-stop local, long-distance, international and Internet services through the combination of MFS’ metropolitan networks, WorldCom’s long-distance infrastructure, and the Internet capabilities of UUNET Technologies Inc, which was acquired by MFS earlier this year (CI 2,904). All told, MFS WorldCom says it will have a 25,000 mile end-to-end fiber network connecting all the major metropolitan areas of the US. Since the company will own its own local and long-distance facilities, it will not be bound by the regulatory restrictions facing the Regional Bell Operating Companies – which have to prove that their local markets are open to competition before they can offer long-distance services – but will instead qualify for preferential treatment under the Federal Communications Commission’s new Interconnection rules. MFS also has metropolitan networks in the UK, Germany, and France. Under the terms of the deal, which was unanimously approved by the Boards of both companies, each share of MFS common stock will be exchanged for 2.1 shares of WorldCom’s common stock. It will be accounted for as a purchase, and the companies are aiming to complete the merger in four to eight months although the deal is subject to clearance under the Hart-Scott-Rodino Act, and approval by the Federal Communications Commission and state regulatory authorities. MFS is to become a wholly-owned subsidiary of the combined company. Bernard J Ebbers, president and CEO of WorldCom will assume the same role at the combined company, while James Q Crowe, MFS chairman and CEO will be chairman of MFS WorldCom. WorldCom will take one more seat on the board than MFS.
