What lies ahead for WorldCom?

It's back to an unclear drawing board for WorldCom and Sprint in the wake of their announcement last week that their troubled merger proposal is officially dead.

The boards of both companies were unwilling to wait until January to have their appeal heard countering the Department of Justice's suit that attempted to block the merger. And the companies were not willing to face the daunting possibility that the Federal Communications Commission and/or the European Commission might still reject the deal even if WorldCom and Sprint were to prevail in court.

Industry observers are not surprised by the deal's collapse, which for WorldCom and Sprint represents the culmination of a wasted nine months. WorldCom is still without a formidable wireless division and Sprint remains an attractive takeover target, says Brownlee Thomas, an analyst at Cambridge, Mass., consulting firm Giga Information Group.

WorldCom still has many options to bring a substantial wireless offering into its service portfolio, and few observers believe that Bernard Ebbers, president and CEO of WorldCom, will be shy about exploring them.

Ebbers also seems to believe the Justice Department has unfairly targeted WorldCom while continuing to approve local exchange carrier mergers. "The legacy of Janet Reno, Joel Klein and Bill Kennard will be the remonopolization of local services for consumers," he said at a New Orleans conference last week.

WorldCom comes out of this aborted deal with nothing gained or lost, Thomas says. Last year WorldCom negotiated with Nextel for a time, but walked away from that deal. Those talks could resume, or WorldCom may prefer to go after VoiceStream Wireless, one of many companies that has been rumored as a takeover target for German service provider Deutsche Telecom.

VoiceStream stands out as one of the more likely targets for WorldCom. Earlier this year VoiceStream merged with two of the better-known GSM communications wireless service providers, Omnipoint and Aerial. While today VoiceStream does not have a national footprint, its network covers 22 of the largest 25 markets and has 2.29 million customers.

But Giga's Thomas says WorldCom may not be done with Sprint. The firms could strike a deal through which WorldCom resells Sprint PCS wireless services to its customers or invests in the wireless division, she says.

It's likely another service provider will make a bid for Sprint in the near future, even though late last week Sprint CEO William Esrey was publicly downplaying the possibility of his company being acquired. Among those suitors rumored to be interested have been Deutsche Telecom and Bell South. But until last Thursday it was unfeasible for any company to negotiate with Sprint, as WorldCom lingered in the picture.

Sprint already has an Internet backbone, frame relay, ATM, long-distance voice and even some local voice networks. And Sprint, of course, has its crown jewel, Sprint PCS. But Sprint doesn't have any international assets, which may be why most of Sprint's possible suitors bring international flair.