LONDON -- Even before a merger dies, the vultures inevitably start to circle.
It looks increasingly likely that antitrust authorities in both the U.S. and Europe will block the merger of
. With Sprint now looking like an ideal takeover target for European telecommunications companies eager to establish a foothold in the lucrative U.S. wireless market, attention has shifted to which of Europe's telcos may swoop down on the company.
are two names that immediately crop up. However, for differing reasons it is unlikely that either will be able to acquire Sprint, at least in the short term.
Although the authorities have not yet officially killed the WorldCom-Sprint merger,
Tuesday that the
may be planning to reject the merger, convinced such a union could put too much of the U.S. long-distance telephone business in the hands of the merged company and its rival
On the other side of the pond, the
competition commissioner Mario Monti, who has been in close contact with his U.S. counterparts and is in Washington today to meet with the Justice Department, is also reportedly minded to block the deal, because there is no sign that WorldCom is ready to sell its internet business
The Commission must make a final decision on the merger by July 12. However, a spokeswoman for the Commission told
on Wednesday that the issue will be on the agenda at the Commission's meeting on July 5, and that an announcement is likely to be made then.
Traders and investors sold shares in all four companies amid concern the merger wouldn't happen. At Wednesday's market close, shares of WorldCom were off 1 3/8, or 3.3%, to 40 5/16 and Sprint was off 1 1/8, or 1.87%, to 59. BT fell 3 3/4, or 2.5%, to 143 7/8, and DT was off 2 1/16, or 3.3%, to 60 1/16.
If, as most people now expect, the deal does fall through, it would be a delicious irony if BT were to merge with Sprint. After all, it was WorldCom that so embarrassed the former British monopoly when it snapped up
from right under BT's nose. However, such a situation is unlikely because BT already has AT&T as a partner.
"It would be shooting in their backyard," says one London-based telecom analyst, who wished to remain anonymous. He has an outperform rating on BT and his firm has no investment banking relationship with BT.
The other potential acquirer is perennial bridesmaid DT, which has made no secret of the fact that it wants to make a U.S. acquisition since its bid for
failed earlier this year. It already has a 10% stake in Sprint, a hangover from its failed
joint venture with Sprint and
. Global One has since been sold on to France Telecom, which also retains a 10% stake in Sprint.
But DT also has a problem. When DT entered the now-defunct joint venture, it signed a "standstill agreement," which prevents it from acquiring a bigger stake in Sprint. Sprint has subsequently accepted a number of amendments to that agreement, but analysts are unsure whether this agreement would still prevent DT from now acquiring a bigger stake in or wholly acquiring Sprint. DT did not return
phone calls for comment.
In any case, a DT prospectus published in conjunction with a share offering earlier this month disclosed that it "does not intend to remain as a long-term shareholder in Sprint" and "expects to dispose of its shares in Sprint." It would be extremely difficult for DT to now attempt a U-turn, no matter the attractiveness of a Sprint acquisition.
These two vultures may have to go hungry for now.