WorldCom's move to outbid British Telecom for MCI Communications marks the emergence of a world-class, multi-faceted carrier and shakes up the telecommunications world.
WorldCom announced it is offering US$30 billion in its bid, which it said represents a valuation of 41% more than MCI's closing stock price yesterday, or a premium of $9 billion over the market's current valuation of BT's bid for MCI.
"This is the worst nightmare come true for AT&T and the RBOCs," says Tom Nolle, president of network consultancy CIMI. "WorldCom is a shark swimming with goldfish, it's showing that it knows how to put together a 21st century network ... with voice, data, local and long-distance services."
The news comes on the heels of two other acquisition announcements: the bid for CompuServe three weeks ago; and the same day's announcement of a definitive agreement to merge with Brooks Fiber Properties, a facilities-based local competitive exchange carrier with services based on a fiber-optic network. That merger, a pooling-of-interest transaction with each share of Brooks stock to be exchanged for 1.65 shares of WorldCom stock, is valued at $2.4 billion plus outstanding debt obligations.
"Bernie Ebbers [WorldCom president and CEO] must wake up in the morning, look in the mirror and see Bill Gates staring at him - WorldCom is outmaneuvering all the big carriers and could be a Microsoft of the telecom world," says Jeff Kagan, president of Kagan Telecom Associates. The CompuServe acquistion adds to WorldCom's already strong networking and online access capabilities, he noted. Meanwhile, Brooks adds local, fiber-based facilities, and MCI brings long distance capabilities to the table, Kagan noted.
Analysts agree that if the deal goes through, MCI will bolster WorldCom's international voice services, on top of its position as a world leader in online access.
"They [are] positioning themselves to be an international player," says Dan Taylor, a senior anayst at market researcher The Aberdeen Group in Boston. Brooks adds a grounding in local services while MCI add international presence, he notes. "I think it's great for users - what MCI-BT was promising was another major international telco provider, a company competitive with AT&T."
By joining its own long-distance services with MCI's, WorldCom will become the second largest US-based long-distance carrier after AT&T, Taylor added. However, WorldCom, with CompuServe's facilities, also has a data network that rivals IBM's, Taylor pointed out. Also in its portfolio is UUNet, the world's largest Internet service provider.
One dark spot is that BT may not give up MCI easily, according to Julio Rancati, an analyst with market researcher International Data Corp. in the U.K. If WorldCom snatches MCI away from BT, it would disrupt the UK-based carrier's internaitonal expansion plans, Rancati pointed out.
Also, the success of WorldCom's mergers will in large part depend on whether it can retain MCI's management team, says Kagan.
"MCI has a lot of experience, and WorldCom is going to need that to handle everything it's doing," Kagan says.
BT officials reached in the UK have declined to comment in detail on the WorldCom bid.