Endless Appetite: WorldCom shakes up industry with $30 billion bid

It was still unclear late last week whether MCI Communications Corp. would accept a shocking buyout offer from WorldCom Inc. Also unclear was what the reaction would be from BT-which already planned to merge with MCI-or whether WorldCom would be allowed by state and national government agencies to even make good on its offer.

But one thing was clear: The world of telecom is talking about WorldCom.

And judging from the brash stance of WorldCom President and Chief Executive Officer Bernard J. Ebbers, that's just as it should be.

"This world is going to end up with a limited number of successful international telecommunications players,' said Ebbers in announcing his company's $30 billion bid to acquire MCI. "This merger gives us the opportunity to be one of those players.'

That WorldCom is now a major player was not questioned last week as industry analysts debated the issues raised by WorldCom's offer. On Oct. 1, WorldCom announced that it had acquired Brooks Fiber Properties Inc., a move that raised the number of fiber optic local networks and switching facilities operated in the U.S. by WorldCom to 86 from 52.

Of Brooks' 44 markets, 34 are in cities where WorldCom did not have a local network. If MCI and and WorldCom were to complete their marriage, it would be the largest takeover in U.S. history and would make WorldCom second in size only to AT&T.

In fact, the creation of another megacorporation might resemble AT&T's pre-divestiture days that ended 13 years ago, something that concerned Tom Nolle, a principal analyst at CIMI Corp., Voorhees, N.J.

"If this goes through, it would create a mini version of the old Bell System,' Nolle said. "It would spawn more mergers and alliances and force other telcos to scramble to put a similar deal together.'

More mergers would create larger companies and, eventually, fewer choices for consumers, Nolle said, which would threaten the goals of industry deregulation: more competition and lower consumer prices.

The Federal Communications Commission and the Department of Justice must both approve such a deal, along with state regulatory commissions.

While regulators may have no problem with the local and long-distance arms of the merger, WorldCom's resulting dominance over the Internet could give them pause, some analysts said. Last month, WorldCom acquired the networking division of CompuServe and the Internet unit of America Online. If it successfully acquires MCI, the combined company would control more than 60% of U.S. traffic on the global computer network.

"But the Internet is so dynamic and so in flux that I think regulators would be hard pressed to see anything but increased competition here,' said Gary Miller, chairman and CEO of Aragon Consulting, St. Louis.

Miller said his management consulting firm has worked with MCI in the past. His contacts there have described a "wait-and-see attitude,' he said. "But in the end, I think they will have to offer [WorldCom's bid] to the shareholders.'

And the shareholders are likely to take the offer, said Craig J. Blakeley, a partner who heads the telecom division of the Washington-based law firm Gordon & Glickson.

"WorldCom is a company that is vertically integrated here; BT is not,' he said. "Assuming WorldCom can jump through whatever hoops the FCC and the Justice [Department] ask them to, my guess is that WorldCom will end up in the MCI driver's seat rather than BT."