MCI WorldCom's $US129 billion offer to buy Sprint has been approved by boards of both companies, who are calling the deal a "merger" with global implications.
If approved by federal regulators and shareholders of each company, the combined carrier would be called WorldCom. The deal would involve exchanging each Sprint share for $76 in MCI WorldCom common stock. The value of the equity deal will be around $115 billion, with the remaining $14 billion of the total transaction value consisting of debt and preferred stock, the statement said. The deal will be accounted for as a purchase.
The deal was heralded at a press conference by Bernard Ebbers, the president and chief executive officer (CEO) of MCI WorldCom, who would keep that title if the deal is approved, and William Esrey, the chairman and CEO of Sprint, who would become WorldCom chairman.
The combined company would have operations in more than 65 countries, with 140,000 employees globally and a local presence in 2,500 US markets for annual revenue of more than $50 billion, Ebbers said. Esrey noted that the company expects to grow at 20% annually. Although some repetitive jobs might be cut if the companies combine, Ebbers and Esrey said they expect overall to add employees to meet the growth plan.
WorldCom would be the second largest US long-distance provider behind AT&T, but that aspect of the deal wasn't stressed by Ebbers.
"I guess the one question I won't get today is what are you going to do about wireless," he joked as he opened the press conference. Sprint's wireless holdings make it particularly appealing to MCI WorldCom, which wants to begin offering bundled services such as those provided by AT&T.
"Customers are buying packages of services and long distance is just part of that," Ebbers said. "We have to provide our customers what they want -- services in a bundle."
Those services would include everything from voice to high-speed data, including wireless. Ebbers' comments confirmed predictions of analysts who said earlier today that they expect WorldCom to roll out bundled services soon after winning approval.
Ebbers and Esrey expressed confidence that the deal will be approved by regulators. Ebbers dismissed a reporter's characterisation that a statement regarding the proposal from US Federal Communications Commissioner (FCC) William Kennard was "harsh" and "critical" of the deal and its possible effect on competition.
Ebbers already has talked to Kennard about the deal and "the chairman told me he would keep an open mind," Ebbers said.
As for whether MCI WorldCom or Sprint will be forced to divest holdings, specifically Internet holdings in Europe, Ebbers said that if regulators insist on divestiture he is willing to consider doing so to keep the deal alive.
He apparently never was worried about an alternative bid for Sprint offered by BellSouth.
"We don't look at BellSouth as much of a competitor in these kind of things," he said.