British telco Cable & Wireless (C&W) announced today the purchase of MCI Communications Corp.’s Internet backbone service for $625 million or 385 million pounds sterling.
The deal is viewed as an effort by MCI to clear the path for its
proposed merger with WorldCom Inc.
The alliance between the telecommunications giants has met with objections by
the U.S. Department of Justice (DOJ), the Federal Trade Commission (FTC),
and the European Commission (EC), all of which have raised anti-trust concerns.
“By divesting MCI’s Internet backbone, we have eliminated any overlap with
WorldCom’s Internet business,” said Bert Roberts, MCI’s Chairman, in a statement. “We have formed an agreement that addresses anti-trust concerns with the MCI WorldCom merger, ensures the continued delivery of quality Internet services for all our customers and creates an exciting new opportunity for some of the industry’s most skilled Internet personnel.”
Under the MCI-C&W deal, which still needs to win DOJ and EC nods of approval, MCI will unload its Internet backbone and ISP service business which comprise total assets of around $100 million (60 million pounds) and projected annual turnover of approximately $220 million (135 million pounds).
In addition, MCI said the sale would give C&W specific guarantees of
revenues and traffic. MCI added that its Internet employees, including
engineers, sales, and marketing staff connected with the ISP, will now work
for C&W. Also, MCI will offer financial support for an incentive program aimed at furthering Internet initiatives.
Not affected by the sale are MCI’s residential and non-ISP commercial
customers (non-resellers of Internet services). The company said it will still provide non-Internet services to its ISP customers. Also, MCI will employ C&W’s backbone services to anchor its non-ISP customer base.
Currently C&W operates Internet services in Hong Kong, the Caribbean, China, Australia, and the UK. It also owns a U.S. subsidiary, Cable & Wireless, Inc. in Virginia, and operates a digital fiber optic network that runs between major U.S. cities.
“This transaction catapults us into a leading role in the World League of
Internet and data traffic carriers,” said Richard H. Brown, Cable &
Wireless Chief Executive. “It gives us the scale and scope we need in the
United States to match our leading role in the rest of the world.”
