Hunters may become prey

News of the possible collapse of the WorldCom/Sprint merger sent the rumor mill into overdrive, as industry observers assessed future options for both companies.

The most prevalent speculation called for Deutsche Telekom to expand its 10% stake in Sprint to full ownership. In fact, Deutsche Telekom bidding for Sprint is "almost a sure thing," according to one report quoting a source close to the company. Sprint's strong Internet and wireless holdings would fit well in the German telco's stated strategy.

More complex rumors surrounded WorldCom. While WorldCom could try to fill its wireless void (see story on page 13), other options mentioned included spin-offs of the UUNet Internet backbone or long-distance service. However, the most intriguing talk involved transforming WorldCom from a takeover giant to a giant takeover target.

But is there a buyer? RBOCs have the money, but none has enough long-distance approvals to warrant the purchase of WorldCom at this time.

Among overseas competitors, Deutsche Telekom again is the best match. Other possibilities include France Telecom and NTT. However, France Telecom's recent spending spree may put it out of the market, and U.S. regulators will scrutinize very closely any move by NTT, which benefits from a closed market in Japan.