Metromedia Plans Expansion

Billionaire John Kluge will merge the long-distance operations of his Metromedia Corp. with two other small carriers to create the nation’s fourth-largest long-distance carrier.

Analysts say the deal sets the stage for further acquisitions by New Jersey-based Metromedia as it tries gain more of the nation’s growing long-distance phone market.

In addition, analysts said the merger suggests that Kluge might join the battle between cable operators and phone companies to provide a variety of emerging telecommunications and programming services.

Under the terms of the latest deal, Metromedia will proceed with its previously announced acquisition of Resurgens Communications of Atlanta. It will also acquire LDDS Communications of Jackson, Miss.

With annual revenue of an estimated $1.6 billion, the new company would control about 2% of the nation’s long-distance market. It would rank well behind the three leaders: American Telephone & Telegraph, whose long-distance revenue last year was $39 billion; MCI, whose 1992 long distance sales were $10.5 billion, and Sprint, whose billings were $5.8 billion.

Craig Ellis, a telecommunications analyst at Wheat First Butcher Singer in Richmond, Va., said he expects that Metromedia might buy as many as 90 more small long-distance carriers to beef up its market strength. “It makes no sense for this company to stop here,” Ellis said. “It will grow and become a cause for alarm among the other long-distance carriers.”