MCI Deposits $115 Billion, Hooks Sprint

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Turns out money talks pretty loudly after all. MCI WorldCom must have known that BellSouth and Sprint were a lousy regulatory match –- talks between the two got nowhere –- but that didn’t keep MCI from worrying about being made to look cheap. So when the Nos. 2 and 3 long-distance companies finally shook hands Monday, MCI WorldCom had upped its offer to $76 a share in stock ($13 higher than originally and $4 higher than BellSouth’s last bid) for a deal worth something like $129 billion, depending on MCI WorldCom's stock price. The result is WorldCom, born of the largest corporate deal in history, and more like the second-largest (Exxon-Mobil) than you might think. "MCI could spend that kind of money because this deal will save them so much," says TIME business writer Karl Taro Greenfeld. "Long-distance rates are so low –- just like oil prices were when the wave of mergers hit that industry –- that the best chance to compete with AT&T is an economy of scale."

BellSouth's interest in Sprint came from its desire to get into the long-distance game and achieve the telecom Holy Grail of one-stop local, long-distance and Internet service, something regulators aren’t ready for. "Until AT&T can make a real business out of offering local service over their phone lines, the FCC is likely to make any Baby Bell wait," says Greenfeld. MCI WorldCom, on the other hand, just liked that Sprint had goodies –- plum digital networks and wireless services, in particular –- that it didn't have. Sprint’s chairman reportedly liked the deal for its cost-saving potential. "There’s so much overlap that there’ll be lots of redundant parts to sell off for cash," says Greenfeld (not to mention lots of jobs to downsize). "MCI will be able to recoup a lot of that cost." In that case, MCI will have its fingers crossed that the FCC smiles on the deal fast –- at $129 billion, they’ll want to start recouping as soon as possible.