Just three weeks after buying out Irish telecommunications company TCL Telecom, US giant WorldCom is in the news again, seeking to acquire MCI, another leading US telecommunications company, for $37 billion (£24.6 billion).
It will be the biggest takeover in corporate history, but analysts say WorldCom may have come to MCI's rescue.
WorldCom was hardly known in Ireland until it paid a reputed £14 million to buy out the remaining 70 per cent it did not hold in TCL Telecom. TCL, which was established just two years ago, provides telecoms services to the corporate sector in Ireland.
TCL is acknowledged by its rivals as a smart, well-run company, which is making significant inroads into the fiercely-competitive Irish telecommunications market. The sector was once dominated by Telecom Eireann but is now being strongly contested by companies such as Esat, Cable & Wireless and, of course, WorldCom.
WorldCom has been on the acquisition trail for some time. But its offer for MCI - trumping the global expansion plans of British Telecom - surprised many. However, a surprise profits warning from MCI earlier this year signalled that all was not well in the company.
For the board of MCI Communications, this week's takeover offer from WorldCom may be the best it could have hoped for.
A sharply higher bid than any other on the table, it promised to put an end to a destabilising period in the company's history, while carving out a role for MCI's senior management in the merged company.
But, with the new bid, the risks of failure have gone up.
WorldCom's revised bid has revived the prospect of a new giant in the US telecoms industry with a market capitalisation of $60 billion and revenues of $32 billion.
Most of the cost savings from a merger would come from combining the two companies' long-distance businesses, giving them a 25 per cent share of this market. The deal would also enable the two to combine their resources in breaking into the $100 billion local markets, using WorldCom's established MFS local networks as a base, and would bring together two of the biggest Internet carriers.
But there is concern about the harm to MCI's business caused by uncertainty about its future. Rival carriers have claimed successes in picking off sales staff and the company, one of the most successful US marketing organisations of the past decade, has turned inward.
In tacit acknowledgment of this, MCI has hit back in recent days with a media campaign intended to reassure its customers.
However, even if no higher rival bid emerges and it pulls off the revised deal with WorldCom in the six- to nine-month time frame promised, there is likely to be continuing uncertainty and upheaval.
The higher bid will call for heavier cost-cutting, while the new management structure of the merged company, involving executives from the two groups, could create tensions.
WorldCom now says it believes it can produce $20 billion of costsavings in the first five years after the merger is completed, compared with the $15 billion it projected before.
Mr Bernard Ebbers, WorldCom chairman, said these higher savings had become apparent as his company had had a chance to look more closely at MCI in recent days. These more aggressive savings, though, imply more job losses - with potentially damaging consequences for morale at MCI.
Mr Ebbers will come to the company with a reputation as a low-cost operator: selling, general and administrative expenses at his company amounted to only 18.5 per cent of revenues last year, against 27 per cent at MCI. WorldCom would have to pare that number without eating into MCI's marketing effectiveness.
Mr Ebbers will have to do this while trying to manage a business much larger than his own. MCI, for instance, may have concentrated on serving businesses - the market that WorldCom understands best - but also has a large base of residential customers.
WorldCom is giving a significant say in the new company to MCI's management. Mr Bert Roberts, MCI chairman, will assume the same title at the new MCI WorldCom. Mr Gerald Taylor, chief executive, will take on international operations.
While giving up the title of chairman to Mr Roberts, though, Mr Ebbers will continue as chief executive - and is widely expected to remain in the driving seat.
See also Current Account, page 6
