Sprint sold for $129 billion

Richard N. Velotta and David Strow

Tuesday, Oct. 5, 1999 | 11:30 a.m.

Today's merger of Sprint and MCI WorldCom has observers wondering if MCI will sell off Sprint's local phone business in Las Vegas. The deal has state regulators concerned about phone rates in Nevada and has unions looking into whether workers' jobs will be protected.

Nevada State Consumer Advocate Fred Schmidt said his office will investigate the merger's ramifications for Clark County, where Sprint is the dominant phone company.

"Because Sprint supplies local service to a million and a quarter Southern Nevadans, it is important for us to ensure we have continuity of quality, low-price local telephone service in Southern Nevada," he said.

"We expect that one of the reasons to do it is that there are some benefits to be obtained from consolidation. If there are cost savings, we would expect Nevada customers to benefit from those savings," Schmidt said.

Today local Sprint officials started receiving word about how the deal would affect the company's 1,900 local employees.

"Our LTD (local telephone division) will not immediately be affected by the merger," said Rob McCoy, a spokesman for Sprint in Las Vegas. "WorldCom will maintain significant operations in Sprint locations."

McCoy said early information from Sprint's corporate headquarters in suburban Kansas City, Mo., indicate the new company will capitalize on its leadership position in wireless communications to bolster local markets.

"Our combined fixed wireless assets finally will offer us the opportunity to be competitive in the local market with access to approximately 58 million homes in 120 markets without dependence on the (regional Bell operating companies) or the limitations of copper wire," McCoy said.

Some analysts said today they expect Sprint to sell off its local telephone assets scattered across 19 states.

Jeanne Schaaf of Forrester Research told the Kansas City Star that MCI has little interest in the rural markets in which Sprint operates local exchanges.

"At least (MCI rival) BellSouth takes advantage of Sprint's business. I think MCI would trash it," she told the Star.

Las Vegas is a big exception to the rural character of Sprint's local operations -- with 560,000 customers and 872,000 lines in Clark County, this market is Sprint's largest local telephone operation.

Put into perspective, Clark County contains more than 11 percent of all of Sprint's local telephone lines across the country. In 1998, it accounted for 7.7 percent of local telephone service revenues at Sprint and 3.3 percent of operating income. Its local infrastructure now carries a value of more than $875 million.

Sprint's local exchange in Las Vegas is coveted for its potential as a growth market. At the same time, Sprint has been forced to pour $170 million a year into keeping up with that growth, a situation Sprint says is causing negative cash flow at the Las Vegas operation. Sprint was successful in pushing through a rate hike this summer to help offset those costs.

Don Soderberg, chairman of the Nevada Public Utilities Commission, said it was far too early to speculate on the fate of Sprint's local operations in Nevada.

"I think it's way too early to tell," Soderberg said. "We're at such a preliminary stage that before we start assuming, we have to take a look at the transaction. But clearly, one of the things we'll look at is the impact on the local operation."

Sprint's Las Vegas general manager, Lou Emmert, was travelling this morning and not available for comment. But a local spokeswoman hinted that MCI may not be in such a hurry to dump the local operations.

"Sprint's local telephone operations are viewed as a unique and valuable strategic asset, and it's an important sales channel for the services that will be available through the new company," said Detra Page.

Despite Schmidt's intention to look into the deal, Soderberg said it's too early to tell whether the merger will have to be reviewed by state regulatory authorities.

"Once the details of the transaction are made public, we'll examine those to see if we have jurisdiction," Soderberg said. "If so, we'll pursue it within the guidelines of the statutes."

Soderberg said the structure of the transaction would dictate whether the state would have jurisdiction in the matter.

"The statutes don't contemplate every acquisition," Soderberg said. "There are ways to structure a deal that would fall within state statutes."

Jim Anzinger, who heads the International Brotherhood of Electrical Workers Las Vegas local, was not available for comment.

The IBEW represents Sprint and Nevada Power Co. workers in Southern Nevada. An IBEW spokeswoman said the union has a contract with the local Sprint office and would work to represent MCI WorldCom if it takes over the Las Vegas operation.

"We're meeting with the company on Thursday," the IBEW spokeswoman said. "There are just so many rumors right now, about what MCI is going to do and won't do, about what BellSouth would do and wouldn't do. We haven't gotten much information from local officials, so we're going to be meeting with a corporate person."

When asked about the potential fate of Sprint's local employees, she said, "I wouldn't even venture a guess at this point."

The Star reported that the Communications Workers of America expressed strong reservations about the merger, saying that competition in long distance and Internet service could be hurt, and local service could be degraded. The union also feared labor problems, the Star said.

Andy Shepard, a spokesman for MCI, said his company has the capability to offer local service for businesses and does so in some of its markets. But most of MCI's focus is on long-distance service and wireless products.

MCI has a business products sales force based in Las Vegas. Nineteen of the company's 58 Nevada employees are based in an office complex at 1771 E. Flamingo Road.

Sprint PCS, like MCI, sells wireless communications products. The company has 100 employees in Nevada and 12,000 nationwide. Sprint PCS products are sold in nine retail locations in Las Vegas, including kiosks at the Boulevard and Meadows malls. Area electronics stores also sell Sprint PCS devices.