A Supercarrier Is Born
WorldCom intends to buy MFS Communications
The latest telecom merger is the ultimate example of the birth of a supercarrier -- WorldCom, a long distance telco, has formed a deal to buy MFS Communications, a local phone company, which in turn had bought Internet access provider UUnet Technologies Inc. Offering long distance, local and Internet access is the one-stop shopping dream of most carriers. WorldCom, however, one-ups many of its would-be competitors by bringing together established powerhouses in each area.
The agreement, estimated at $14.4 billion, would create a company that would eclipse the size of MCI Communications Corp. The new company will be called MFS WorldCom. The merger, announced Aug. 26, is expected to be completed in four to eight months.
"Rarely in business do you have the opportunity to bring together premier growth companies from key segments of an industry," said Bernard J. Ebbers, president and CEO of WorldCom, in a statement.
The new business expects to save line and access costs by connecting WorldCom's networks to those owned by MFS. A 25,000-mile fiber optic network connecting all major U.S. metropolitan areas will be the cornerstone of the business.
The combined pots are also expected to boost the company's international reach.
Undoubtedly, the Internet expertise of UUnet was a great draw for WorldCom. John Sidgmore, president of UUnet, said the merger will help meet an exploding demand for intranets from a single provider. "The merger of MFS and UUnet combines the nation's leading provider of Internet services to business with a state-of-the-art local fiber optic network in the United States and Europe. The merger with WorldCom Inc. adds the missing element, a broadband intercity network," Sidgmore said.
The new company is expected to have an annual revenue of $5.4 billion, with 500,000 customers worldwide. Bernard Ebbers will become president and CEO of MFS WorldCom, with James Q. Crowe as chairman of the new company and chairman and CEO of MFS. John Sidgmore will remain CEO of UUnet and take on the roles of vice chairman of MFS WorldCom and president of MFS.