CompuServe deal eyed by regulators: DOJ to review split of assets between WorldCom, AOL

Federal regulators already have announced a review of the proposed breakup of CompuServe between America Online and WorldCom.

In the deal announced last week, CompuServe's parent, H&R Block Inc., will sell the subsidiary to WorldCom in a stock swap valued at $1.2 billion. America Online will then acquire CompuServe's 2.6 million consumer accounts from WorldCom in exchange for $175 million and AOL's network services subsidiary, ANS Communications. WorldCom will retain the network services division.

The U.S. Justice Department said it would review the agreement to ensure that it will not violate antitrust laws, stifle competition or promote higher consumer or business prices, according to a DOJ spokeswoman. WorldCom and AOL spokesmen have said that both companies are confident the deal will pass inspection.

If the deal survives regulatory scrutiny, it will further enhance WorldCom's position as a network provider for on-line services and business applications.

"Not only will the transaction generate significant revenues, it will yield crucial economies of scale, which will augment our ability to compete with new competitors down the road, especially the [Bell companies] and PTTs," said John Sidgmore, WorldCom's vice chairman and chief operations officer, as well as chief executive officer of UUNet, WorldCom's Internet service provider subsidiary. "Through these acquisitions, we will be able to provide our business customers with the broadest range of Internet services available, over the broadest and most geographically far-reaching infrastructure available."

"The strategy looks like just the right thing for [WorldCom],' said Scott Wright, an analyst at New York-based Argus Research. "It focuses them on business customers on the Internet, which is where they want to be focused.'

>From AOL's perspective, the deal brings in both a huge number of new customers and a substantial increase in its network capacity. The company will have access to 650,000 modems by year's end--more than triple its modem capacity in January, said Steve Case, AOL's CEO.

Additionally, the deal brings 850,000 European CompuServe customers, more than doubling the company's presence overseas.