RHK presents four reasons why WorldCom should get broken up, sold off, buried, burned, and stomped on

August 13, 2002

1 Min Read

SOUTH SAN FRANCISCO, Calif. -- RHK, strategic advisors to the telecom industry, Monday argued that telecom and U.S. industry would be better off if WorldCom, now in bankruptcy, did not return to business.Instead, RHK Principal & Chief Analyst Dr. John Ryan said WorldCom should be broken up and its key elements sold off. RHK identifies four principal reasons why WorldCom should shut its doors.

  • First, WorldCom’s self-inflicted damage should not be repaired when its competitors are trying to run honest operations and would not benefit from rescue attempts.

  • Second, rescuing WorldCom would bring back to life a firm with significant unresolved inefficiencies. Many of the company's financial woes stemmed from its focus on increasing top-line revenues via acquisitions, rather than on the more complex, less glamorous task of integrating these operations.

  • Third, the industry needs capacity to disappear. Over-investment during telecom’s bubble years has created a surfeit of capacity and service providers. The recycling of assets from bankrupt service providers is an astonishing way of preserving the industry’s pain.

  • Fourth, there may well be further rot to find, as suggested by the recent announcement of an additional $3.3 billion of misreported expenses on top of the $3.8 billion already revealed.

RHK's view is that any funds the Government might offer to "rescue" WorldCom would be better used to help heal the wounds of the firms and individuals WorldCom hurt -- or to launch an accelerated U.S. broadband campaign to encourage the nation's Internet economy.RHK Inc.

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