WorldCom Chief Says Regulation Is Stifling the Industry

The head of WorldCom Inc. strongly indicated Tuesday that the company’s proposed merger with Sprint Corp. is dead and said federal authorities are regulating the industry to the point that it’s hurting companies and consumers.

After a speech to the Wireless Communications Assn. International conference, WorldCom President and Chief Executive Bernard Ebbers was asked by a meeting delegate whether he had anything to report on the merger, which has been dealt major setbacks by Justice Department and European Union antitrust regulators.

“No,” Ebbers said. “I don’t think there is much left to discuss.”

Late last month, Atty. Gen. Janet Reno announced that the Justice Department was suing to block the $129-billion deal; subsequently, WorldCom and Sprint pulled their merger application in Europe.

The Justice Department contends that the merger of the second- and third-largest long-distance carriers would leave millions of Americans paying more for less service. Mario Monti, EU competition commissioner, said the merged company would sharply reduce competition for Internet connections.

While the companies have said they are still pursuing the merger, industry analysts widely expect it to be called off in coming days, believing the issues raised by regulators are too great to overcome.

Although Ebbers did not expand on the problems surrounding the WorldCom-Sprint deal, he said there “are some very ominous signs ahead” of U.S. telecommunications companies’ abilities to compete on the worldwide market.

One purpose of the WorldCom-Sprint deal was to provide the revenue needed “to develop new markets as they appear,” he said.

At the same time, telecommunications consumers may be hurt in the future, Ebbers said.

“All of the transactions where the monopolies [Baby Bell companies] expand their territory have been approved, and all the significant transactions where competitors to monopolies wanted to expand their geographic footprints have been shut down,” Ebbers said.

Bell Atlantic Corp. and SBC Communications Inc. both recently received federal approval to enter the long-distance market in certain areas.