To satisfy US and European regulators' concerns that the merging companies would dominate the Internet, MCI said it would sell its wholesale and retail Internet businesses to Cable & Wireless Plc for $1.75 billion in cash.

The merger catapults Jackson, Mississipi-based WorldCom into the major leagues in the third-biggest US telecommunications deal, behind the proposed merger of SBC Communications Inc and Ameritech Corp and AT&T Corp's pending acquisition of Tele-Communications Inc.

And with the divestiture, Cable & Wireless becomes one of the largest US Internet service providers virtually overnight.

The justice department's approval removes one of the last hurdles to the deal, which won approval from European regulators last week.

``The merger as originally proposed would have given WorldComMCI a significantproportion of the nation's Internet traffic, giving the company the ability to cut off or reduce the quality of Internet services that it provided to its rivals,'' assistant attorney general Joel Klein explained.The US federal communications commission (FCC) is expected to complete its review in August, as the nation's fourth-largest long-distance carrier swallows the second-largest.

``We look forward to completing the review expeditiously,'' said chief of staff John Nakahata to FCC chairman William Kennard.

The deal also must be approved by state utilities regulators in California, Montana, Pennsylvania and West Virginia.

MCI chief financial officer Michael Rowney said none of the pending reviews was likely to delay the expected close of the merger by the end of August.``We do not see any significant issues that would preclude a summer time completion of the merger,'' Rowney said in a conference call with Wall Street analysts.

MCI said the Internet businesses sold to Cable & Wireless had projectedrevenues of $375 million this year. The assets sold included MCI's wholesale business, which connects 1,300 smaller Internet service providers to the Net, and its retail business with 250,000 consumer and 60,000 business customers who dial in to the Net using personal computer modems. About 1,000 MCI employees will be transferred to Cable & Wireless.

MCI and WorldCom agreed not to try to woo back the wholesale customers for two years, but said no such arrangement was in place to prevent them from immediately seeking to win back former dial-up customers.

The merger could still be derailed by a private lawsuit filed by Stamford, Connecticut-based GTE Corp which lost the international bidding war for MCI last fall.

Spokesman Peter Thonis said GTE continued to have concerns about MCI-WorldCom's dominance in the long-distance market. Thonis said he could not comment further until GTE saw all the details of the justice Department's decision.

Analysts said the sale of MCI's Internet business would not have asignificant impact on the merged company. WorldCom retained its fast-growing UUNet subsidiary, which also offers Internet services.

Goldman Sachs & Co. analyst Richard Klugman noted the Internet sale represented a tiny share of the combined company's expected market value of about $100 billion.

``I wouldn't call it negligible, but its not a critical, deal-breaking amount,'' Klugman said.

Another industry analyst, who declined to be named, said C&W overpaid for the assets since many of the corporate customers may quickly defect to other data providers.

``Cable & Wireless may find that the price they paid was too grand given the way the customer issue shakes out over the next year,'' he said.

The prices of MCI and WorldCom stocks soared to all-time highs in anticipation of the justice department's afternoon announcement. MCI shares closed at $67, up $2.69, while WorldCom gained $2 to finish at $54.75, both on Nasdaq.