Merger Between Sprint Corporation and WorldCom Case Study

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Merger between WorldCom and Sprint Corporation

The past few years have been characterized by trends such as privatization, liberalization and deregulation in industries once managed by the government. Take the telecommunications sector as an example: In the early 1990s, over 129 countries set up privately owned regulatory agencies, and another 100 countries privatized the government-controlled telecom companies. The Federal Communication Commission (FCC) of the US telecom Industry strives to control competition, standardize prizes and inspect foreign communication. The same issues licenses to various service providers under their jurisdiction. The institution also helps telecom services across the country to establish themselves and get running. Protection of consumer rights is also part of their mandate. They are also the ones behind the National Broadband Plan (National Research Council, 1995).

The debate on the government policy on the information industry has been on for quite some time now. As a matter of fact, the telecommunications sector is a major requisite for the growth of the economy. The existence of the telecommunications sector dates back to the years when the Bell system achieved high quality communication over long distances. That was the turn of the 20th century. Since then, the telecommunications sector has been under the watch of both state and national governments. The policy on two issues has particularly been of concern to many. These are: the necessity of nationwide inter-exchange traffic for the benefit of the consumers, and the long-term economic advancement of the country (National Research Council, 1995).

For this reason, and many others, any upcoming initiative related to the countrywide telecommunications infrastructure must be well thought and, in a position, to challenge the comprehensive regulatory superstructure that has been in operation for over 20 years and still has a say on the actions of key players in the telecommunications sector, in things such as prices, technology, system integration and infrastructural development (Baye & Prince, 2017).

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Even in the mid-1990s, the proposals that were put forward to improve the telecommunications industry remained as recommended changes (National Research Council, 1995).

Narrowing down to our area of focus, MCI WorldCom Inc. and Sprint Corporation, which are the country’s number two and number three long distance carriers, have been contemplating a merger. If the Clinton based MCI WorldCom buys the Sprint, they will gain a lot from its countrywide wireless network and therefore increase its profits. AT & T leads the American long-distance communication industry, followed closely by WorldCom and Sprint in that order. These three combined serves almost 80% of the population. For this reason, regulators are foreseeing a situation where the merger of WorldCom and Sprint will result in a kind of a monopoly which can set prohibitive prices for its products as they wish (Blumenstein, 1999).

WorldCom has over the years heavily invested in infrastructure and is now the second biggest company in the US for long distance communication services. Better still, it is the number one provider of private voice and data connected through the US. WorldCom provides its services to nearly 70 countries in the world. Their voice and data income in 1999 from the US only were around $ 6.6 billion. Their widespread international infrastructure, including 100 submarine cables, and 213 carriers in 157 countries, make WorldCom lead the US market by a great margin (Blumenstein, 1999).

UUNET is fully owned by WorldCom. It is the biggest Tier 1 IBP and is quickly heading to dominate the Internet backbone market. A survey was conducted in February 2000 to determine the share of internet traffic among the top service providers in the US. UUNET led by a whopping 37%, while Sprint trailed behind at 16%. The….....

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