RE: Worldcomm/UUNet makes a bid for MCI and BROOKS Fiber

The entire Wall Street Journal Article

WorldCom to Launch MCI Bid
                  To Rival British Telecom's Pact

                  New Offer May Spur Battle
                  For Major Long-Distance Firm

                  By STEVEN LIPIN and JOHN J. KELLER
                  Staff Reporters of THE WALL STREET JOURNAL

                  WorldCom Inc. launched a blockbuster $30 billion takeover bid for MCI
                  Communications Corp. Wednesday in an attempt to wrest control of MCI
                  from its would-be owner British Telecommunications PLC.

                  The stock deal, which values MCI at $41.50 a share, a 41% premium to
                  MCI's closing stock price Tuesday, threatens BT's revised $18 billion pact
                  to purchase the 80% of MCI shares it doesn't own. The unsolicited offer
                  could set the stage for a battle for the No. 2 ranked U.S. long-distance
                  phone concern -- something BT clearly didn't expect when it reduced the
                  price it would pay for MCI.

                  WorldCom's bid of $41.50 a share in stock tops the $34 a share British
                  Telecommunications agreed to pay for MCI.

                  The transaction will be accounted for as a
                  purchase and will be tax-free to MCI holders.

                  The deal is expected to increase Worldcom's
                  earnings by up to 22% in the first year after

                  The number of Worldcom common shares to
                  be exchanged for each MCI share will be
                  determined by dividing $41.50 by the 20-day
                  average of the high and low sales prices for
                  Worldcom common stock prior to closing of
                  the exchange offer, but will not be less than
                  1.0375 shares, if Worldcom's average stock
                  price exceeds $40, or more than 1.2206
                  shares, if the average stock price is below $34.

                  Following closing of the exchange offer,
                  WorldCom will effect a second-step merger
                  with all remaining MCI holders receiving the
                  same per share consideration of $41.50.

                  The deal would require approval from the U.S. Federal Communications
                  Commission and MCI and WorldCom shareholders.

                  Nonetheless, Worldcom President and Chief Executive Bernard J. Ebbers
                  said, in a letter to MCI, that he expects the deal to close no later than the
                  first quarter.

                  For WorldCom, a scrappy phone concern that currently is the
                  fourth-biggest long-distance player, the MCI acquisition would catapult it
                  into a strong second place behind AT&T Corp. MCI's long-distance assets
                  would be joined with WorldCom's local phone and Internet businesses.

                  Indeed, if WorldCom succeeds in taking over MCI -- a big if -- it would
                  have the broadest collection of assets in the industry for competing on all
                  telecom fronts.

                  Brooks Fiber Deal Set

                  Also on Wednesday, Worldcom announced an agreement to acquire rival
                  local-exchange carrier Brooks Fiber Properties Inc., boosting the
                  company's local business. Worldcom valued the deal at $2.4 billion, plus
                  outstanding debt obligations.

                  WorldCom said each Brooks common share will be exchanged for 1.65
                  WorldCom common shares. The transaction is structured to qualify as a
                  pooling of interests.

                  In a separate press release, Brooks Fiber said it valued the transaction at
                  about $2.9 billion, or $58.37 a Brooks Fiber share, based on the price of
                  WorldCom common shares at the close of the market on Sept. 30.

                  The company said the merger will expand the number of all fiber optic local
                  networks and switching facilities it operates in the U.S. to 86 from 52.
                  WorldCom said the majority of the Brooks' markets are in cities that
                  WorldCom didn't have local facilities already established.

                  An acquisition of Brooks, based in St. Louis, WorldCom round out its local
                  networks, analysts say. Founded in 1993, Brooks is one of a handful of
                  "competitive local exchange carriers," or c-lecs, that have jumped into the
                  local phone market by building local networks for predominantly business
                  users. Last year, WorldCom purchased the biggest c-lec, MFS
                  Communications, for $14 billion in stock.

                  Stunning Reversal Possible

                  For BT, if WorldCom succeeded in acquiring MCI it would be a stunning
                  reversal after a year of trying to complete the biggest cross-border merger
                  in history. The loss of MCI could seriously impede its efforts to expand
                  globally, especially in the critical U.S. telecom market.

                  A WorldCom/MCI combination would create a company with more than
                  $27 billion in annual revenue. Though WorldCom brings only about $7
                  billion in annual revenue, the company's growth rate and mix of businesses
                  gives it a market capitalization of $33 billion, giving the Jackson, Miss.,
                  company a powerful currency to make a bid. How the stock market reacts
                  could ultimately determine the company's success.

                  The bold gambit by WorldCom and CEO Mr. Ebbers stems from BT's
                  decision in late August to lower the price for MCI by about 25%. The
                  lower price came after the Washington, D.C., carrier reported a
                  disappointing slide in its core long-distance business and projected widening
                  losses from its effort to enter to U.S. local phone market.

                  MCI's second-quarter results fell far below expectations, and now some
                  analysts are saying its third quarter won't be any better. Senior executives of
                  MCI and BT have been squabbling over whether to attack the Bell market
                  aggressively and increase spending on the effort or to hold the line on
                  spending, thereby shoring up MCI's earnings.

                  WorldCom might not face the same issues with an MCI purchase. Much of
                  WorldCom's local phone investments have been made, or would be
                  strengthened with a Brooks deal.

                  MCI Approved Initial Pact

                  MCI shareholders approved the original merger pact earlier this year before
                  BT negotiated to cut the price it would pay. As a result, MCI needs
                  shareholder approval again and is preparing for a second vote on the new
                  merger terms. Specifically, MCI needs 50.1% of the shares outstanding to
                  vote in favor of the revised merger pact.

                                       Given that BT owns 20% of the shares
                                       outstanding and obviously will vote in favor of
                                       its own accord, WorldCom can try to thwart
                                       approval if it can persuade enough investors to
                                       vote against the plan.

                  Given the price-cut, BT probably never thought it would have competition
                  for MCI. And while it could obviously raise its bid given its own financial
                  might, that would probably anger its own investors, many of whom
                  pressured BT to cut the price in the first place.

                  Break-Up Fee $450 Million

                  Under the terms of the merger accord, the transaction can be terminated
                  under various scenarios, including mutual consent by the boards of the two
                  companies. In addition, it can be terminated if MCI or BT shareholders
                  don't approve the pact; if the boards withdraw their recommendation; if a
                  superior proposal is presented and approved by the board. Under that
                  scenario, MCI -- or its new merger partner WorldCom -- would have to
                  pay BT a "break-up" fee of up to $450 million.

                  The merger pact says if MCI receives an unsolicited bid that is viewed as a
                  "superior" offer by its advisers, MCI would have the obligation to consider
                  its fiduciary obligation to shareholders.

                  An MCI acquisition would create a behemoth in the telecom world. Mr.
                  Ebbers moved quickly to structure the company so that it can capitalize on
                  the two biggest problems currently facing world-wide telecom service
                  providers: a shortage of capacity and the explosion of demand for data

                  First Mr. Ebbers expanded his long-distance customer base and network
                  operations by buying numerous rivals. One in particular, WilTel, gave him a
                  high-capacity fiber-optic network that he has since expanded through
                  WorldCom's own internal construction and by buying capacity on other
                  networks, such as the super network currently being built by Qwest
                  Communications International Inc. Then last year Mr. Ebbers bought MFS
                  Communications Inc., gaining local fiber-optic networks in numerous U.S.
                  and overseas cities.

                  And MFS held another strategically critical asset for WorldCom: UUNet
                  Technologies Inc., the biggest operator of local Internet-access points in the
                  world. UUNet has several thousand of these data systems or "access
                  nodes' placed in most U.S. urban markets and foreign countries. This allows
                  WorldCom to capture not only Internet traffic world-wide but also present
                  a formidable challenge to established carriers once it begins passing regular
                  phone calls through its Internet systems.

                  Without commenting on the Brooks or MCI bids, Morgan Stanley's
                  Stephanie Comfort said WorldCom is "picking up all the right pieces for the
                  long-term, especially in Internet."

                  But she noted that WorldCom, like all long-distance carriers, also faces
                  competitive pressure from an entry by the Baby Bells into the long-distance
                  business. WorldCom still derives 57% of its revenue from its long-distance

                  Still, Ms. Comfort added: "The important thing in this industry is execution,
                  and WorldCom has a good record of delivering."

                  Mr. Ebbers recognized early on that the Internet is by far the biggest
                  long-term destabilizing threat to AT&T, the Bells and others. These carriers
                  must contend with demands for new capacity that are far outstripping their
                  abilities to supply it and they must compete with Internet companies that are
                  using many of the same facilities at a fraction of the established carriers'

                  Whoever controls access to this Internet pipe will gain the high ground in the
                  telecom wars. Practically all voice, data and visual communications will flow
                  through the Internet one day. "Any company that doesn't have a world-wide
                  means of giving customers such connections to this pipe will find itself
                  disembowled and left behind in the telecom wars," says one prominent
                  industry executive.

                  Internet Users' Advantage

                  Internet users don't pay near what phone users do for service even though
                  they use many of the same lines. The reason for this pricing dichotomy lies in
                  regulation. Phone companies are forced to charge certain usage rates to
                  phone customers for regular phone service. But data-transmission services
                  are priced lower to encourage technical communications and development.
                  For this reason a 10-page fax to Tokyo can cost $10 or more, while the
                  same transmission via the Internet costs only a few pennies.

                  The data impact from such a network is clear, when documents can be
                  moved for pennies on the dollar compared with regular phone lines. The
                  bigger damage will come when Internet-access companies, such as
                  WorldCom, begin using their systems to also pass phone calls for a fraction
                  of what phone companies charge.

                  Using its global Internet-access system, WorldCom could become a virtual
                  local phone company in the future. While they will use some of the same
                  lines as regular phone callers, the Internet companies' clients won't have to
                  support these critical phone facilities. Instead, an Internet user will simply
                  dial another user through the Internet, make a connection, and begin a

                  In early London trading Wednesday, BT shares were 41 pence higher at
                  450 pence on volume of 39 million shares.
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