The European Commission cleared the $37 billion (£27 billion) merger between MCI Communications Corp and WorldCom yesterday but insisted that MCI sell off its Internet businesses.

WorldCom employs 50 people in Ireland, providing services to the corporate market.

The European Union executive said the sell-off was needed to ensure the two US telecommunications giants did not dominate the market for Internet "connectivity" services to retail customers and Internet service providers.

"The merger would have given the combined entity a market share of some 50 per cent of the relevant market," it said in a statement.

The Commission said the buyer would have to be approved by both EU and US regulators, which are reviewing the deal, and that it might appoint a trustee to oversee the divestiture.

It also imposed a "non-compete" clause barring the merged entity from trying to win back MCI Internet customers that are transferred to the new owner. The clause would apply for a limited period, but officials declined to give details.

The companies have declined to say if a buyer has been lined up for the MCI assets, although British telecoms company Cable and Wireless (C&W) has said it is in the running.

MCI and WorldCom both welcomed the Commission's decision, saying they expected to complete their merger this summer following US regulatory approval.

US telecoms company GTE Corp, which filed suit in the United States to block the merger, hailed the Commission's decision to require MCI to divest all of its Internet assets.

But executive vice-president, Mr William Barr said in a statement that GTE would not drop its lawsuit until it was sure the sell-off was "durable and fully effective", with safeguards to prevent MCI from recapturing divested Internet customers who buy other MCI services.

Furthermore, he said, the ruling did not address "the serious competitive problems caused by this deal in long-distance markets", an issue where the Commission expressed no concerns. MCI is the second-largest and WorldCom the fourth-largest long-distance carrier in the United States.

The Commission has insisted from the start that the merger partners eliminate the overlap between MCI's Internet interests and WorldCom's UUNet Technologies.