GTE threatens $40bn merger

Bid to strip WorldCom/MCI of internet business

THE AMERICAN phone company GTE has told European and American competition authorities that they should force WorldCom to sell UUNet Tech-nologies, an internet company, as a condition for approving its planned $41.8bn (pounds 26bn) ac-quisition of MCI Communications.

GTE, the third-ranking US local phone company, intensified its efforts to block the takeover, arguing that the combined company would control half the world's internet access, a claim Worldcom disputes. GTE told a two-day hearing of European Union competition regulators that Worldcom should sell UUNet, which supplies Micro-soft's network, known as MSN.

None of the companies involved would comment on the matter. The European Commission and US Federal Communications Commission said that the internet was an area under review as part of their consideration of the merger.

Concern about a combined WorldCom/MCI's dominance of the booming market for global internet access is mounting, mainly from US rivals, who are anxious that it would be a formidable competitor in the American market.

Analysts said WorldCom was unlikely to agree to sell UUNet because the internet is the fastest-growing segment of the market and will increasingly come to carry more voice, video and other data traffic.

"Discussions with the FCC and EC are still ongoing, and this assumption that we control 50 per cent of the internet backbone is being put about by opponents, not customers," said a spokesman for WorldCom in London.

"We're in discussions with regulators about how much of that market we own, if indeed such a market can be defined."

GTE and Sprint, the third-largest US phone company overall, have both filed lawsuits against WorldCom's bid on the grounds that it would stifle competition in the global internet and long-distance communications markets.

"A definition of what makes up the internet backbone market is part of the US FCC's review [of WorldCom's plan to buy MCI]," said Diane Cornell, chief of the international bureau at the FCC's telecommunications division.

The internet is made up of a mix of public and private communications networks. Measured by internet revenues, WorldCom/MCI has about 20 per cent of the market. Measured by traffic, it could be said to control 50 per cent at any one time, because most internet calls are routed via the US. However, since the internet was designed by the US Department of Defence to be able to resist military attack, traffic flows are constantly being rerouted.

WorldCom said its internet revenues combined with those of MCI only amount to about 5 per cent of total sales, and total less than the $2bn of savings in capital expenditure that the companies said they would make by 1999 when they announced their plan to combine the businesses.

MCI carries about 40 per cent of all internet traffic, while WorldCom further beefed up its internet business this year by acquiring the network services units of CompuServe and America Online.

Last week GTE, which lost out to WorldCom on its bid to buy MCI last year, filed a lawsuit in the US to block WorldCom's bid on the grounds that it would monopolise the internet and significantly endanger competition in long-distance communications.

The European Commission began reviewing the proposed telecoms takeover in November and must make a final ruling by 15 July. The US Department of Justice and FCC must also rule on the plan.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive + incentives + uncapped comms: SThree:...

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future