C&W files lawsuit to keep MCI to deal

CABLE AND WIRELESS said last night it had filed a US lawsuit to require the US group MCI to comply with its agreement to sell its Internet backbone business.

MCI agreed last month to sell its wholesale Internet business to Cable and Wireless for $625m. That sale is contingent on MCI gaining regulatory approval on its proposed acquisition by WorldCom.

Cable & Wireless said in a statement that it was seeking an injunction "in order to protect its position".

MCI has not reneged on the Cable & Wireless deal and said it was surprised by the lawsuit, which was filed in US District Court in Washington.

MCI agreed to sell the Internet assets to Cable & Wireless in a move to appease antitrust concerns. Critics contend that a combined MCI-WorldCom would have a dominant position in the Internet market.

Cable and Wireless's lawsuit was seen by industry experts as a pre-emptive strike to force MCI to comply with the sale in case MCI makes other concessions to gain regulatory approval for the WorldCom deal.

If it goes ahead, the the deal will allow Cable & Wireless to established itself as a major player in the booming Internet industry. The acquisition will catapult C&W into the top five providers of Internet capacity in the US and give it exposure to one of the fastest- growing parts of the telecommunications industry. C&W is buying MCI's "backbone" - the physical infrastructure over which Internet traffic runs - as well as a customer base of 1,300 service companies which use MCI to connect their customers to the Internet.

When the deal was struck, Dick Brown, C&W's chief executive, hailed it as a "huge leap" for the group.

The price agreed was less than three times the division's projected revenues for the coming year, which are likely to be about $220m. Similar businesses in the US have been sold for much higher multiples.