Several reports in The Wall Street Journal last week that MCI WorldCom is looking to buy Sprint left investment bankers giddy, telecom executives nervous and users downright fearful.
The possibility of a massive deal between the No. 2 and No. 3 long-distance carriers is believed to be only one of several options that Sprint is exploring. Two of its biggest shareholders -- Deutsche Telekom and France Telecom -- are widely expected to be backing out of their Sprint stakes.
Sprint has been under pressure to find a merger partner that could give the carrier the big-city local networks it lacks, while MCI WorldCom has been under pressure to buy a carrier with the wireless networks it's missing.
If a takeover offer from MCI WorldCom comes soon, it will be because MCI WorldCom sees a window of opportunity that will likely close in the future, says Alan Pearce, president of Information Age Economics, a Washington, D.C., consulting firm.
Once regional Bell operating companies get long-distance authority, they may start bidding for Sprint, and Bell Atlantic is considered likely to win approval for
long-distance in New York state by year-end, he notes.
Technically, Bell Atlantic could bid for Sprint today, but regulators have made it clear that if either party to a merger is a regional Bell operating company that does not have long-distance authority, then the combined company cannot carry long-distance traffic in that region. Qwest and US West have accepted the likelihood of such a temporary restriction in US West's region after their merger closes, but Sprint -- with the company's massive television long-distance advertising -- is thought to be unwilling to do so.
If Sprint avoids that problem by marrying MCI WorldCom -- a prospect that Wall Street heartily endorsed by bidding up Sprint's stock price -- the two companies will face another headache: resistance among their enterprise network customers.
MCI WorldCom users in particular were nearly apoplectic last week at the prospect of riding out yet another merger. "Nothing could confuse things more than a merger with Sprint," says Andrew Stratford, telecommunications director at Congress Financial, a New York specialized lender.
Stratford, a legacy World-Com user and current president of the Communications Managers Association, recited a now-familiar litany of billing and customer-service problems he attributes to the MCI/ WorldCom union.
"Do you know that MCI personnel are still trying to sell me long-distance?" he says. "I've had to ward off at least five to 10 sales pitches, and I say to them, 'Don't you people ever look at your own database?' "
MCI WorldCom and Sprint declined comment on the reports of merger talks.
This story, "MCI/Sprint merger? Wall St. smiles, users frown" was originally published by Network World.