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Huge telecom mergers set to get the go-ahead

The US Justice Department on Thursday approved the telecom industry mega-mergers of Verizon with MCI and SBC with AT&T, subject to the divestiture of some operations by both groups.

The approvals clear a major hurdle to the deals that will create two telecom powerhouses in the US. The mergers must still be reviewed by the Federal Communications Commission (FCC), but the Justice Department said it "has coordinated with the FCC throughout its investigation."

Analysts say it is rare for the agencies to disagree on approvals.

The mergers would effectively end an era for two major names in the telecom industry: AT&T, which goes back to telephone inventor Alexander Graham Bell; and MCI, which emerged from the scandal-plagued group WorldCom.

The Justice Department said it would require both Verizon and SBC "to divest portions of certain local fiber-optic network facilities" to proceed with the mergers.

The US$16 billion sale of AT&T to SBC and the US$8.5 billion purchase of MCI by Verizon makes the two largest US telecom firms even bigger.

Under the Justice Department's edict, SBC and Verizon have to divest some fiber-optic assets in more than 700 hundred commercial buildings in 19 cities.

Critics unsuccessfully sought stiffer conditions, arguing that competition in the business market would be reduced by the mergers.

Authorities officially filed suit to block the mergers, but said the deals would be allowed if the companies accepted the terms. Both SBC and Verizon have indicated they would follow the terms.

Verizon said in a statement it expects its deal with MCI to close later this year or early next. SBC said it expects to complete the acquisition this year.

"The Justice Department has a comprehensive view of the state of the communications industry, and its decision reflects a fair and impartial determination that, with these narrowly tailored conditions, the merger of SBC and AT&T will not harm competition," said James Ellis, SBC senior executive vice president and general counsel.
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