European competition chief Karel Van Miert raised hopes today that the WorldCom-MCI merger would be approved, but it's still unclear whether WorldCom would have to sacrifice its Internet backbone company, UUNet Technologies.
Van Miert said he expected the companies to make additional proposals to address concerns that the US$37 billion telecom deal would dominate Internet services.
"There are indications that both companies will make new proposals," he told reporters in Cologne, Germany.
MCI announced last month that it was selling its wholesale Internet business, which deals in infrastructure and equipment, to Cable & Wireless Plc.
But competitors GTE (the main critic of the merger) and Sprint said this was not enough. Van Miert has also said MCI and WorldCom must do more to win his blessing.
Last week, Van Miert said the sale of UUNet would have addressed the European Union's concerns, but neither he nor other commission sources say this is the only option to eliminate any overlap. A commission source said media reports that UUNet would have to be sold were "speculation."
Selling MCI's Internet backbone would be more difficult, because it is not a separate company.
WorldCom CEO Bernie Ebbers has ruled out divesting UUNet, and a source close to the merger partners warned this week that such a demand would kill the deal with MCI altogether.
On the other hand, WorldCom has little choice but to try to accommodate regulators since breaking off the deal would force it to pay $1.6 billion to MCI and $250 million to British Telecommunications Plc, which has a 20-percent stake in MCI.
The European Commission must rule on the merger by 15 July, but is planning to take up the issue on 8 July to allow time to draft a final decision that withstands any legal challenge. A committee of national experts from the EU's 15 states will meet on 19 June to give its advice.
Although Van Miert usually insists on the need to address merger concerns a month before the deadline "so that companies do not drag their feet or try to corner the commission," the WorldCom-MCI talks are likely to push the deadline.
Van Miert said in a conciliatory tone today that the companies had until the beginning of July to negotiate.
It is unclear how much progress the US Justice Department has made in its review of the merger, but the two authorities have cooperated closely to try to wring the same concessions from the communications partners.
