Capellas Sets 100-Day Strategy

Bankrupt telecom giant WorldCom Inc. (OTC: WCOEQ) will file a restructuring plan in 100 days, CEO Michael Capellas said today (see WorldCom Unveils 100-Day Plan). In the meantime, the carrier will focus on boosting corporate sales under a newly appointed management team.

Capellas, who joined WorldCom from Hewlett-Packard Co. (NYSE: HPQ) in December (see Michael D. Capellas), told the company’s 60,000 employees that WorldCom needs to cut costs, increase credibility, and launch a series of new products and services in the period leading up to the planned filing of its restructuring plan on April 17.

“In 100 days, we’re going to determine our future,” Capellas said. “It’s time to take the fight to the streets… We are going to win… In 100 days we will celebrate.”

Capellas said WorldCom’s main areas of focus over the coming months will include:

The SMB market will be the main focus of WorldCom’s efforts over coming months, Capellas said, pointing out that in WorldCom’s addressable space, that market is worth $25 billion. “This should be our heritage. We need to go get it back… This is a market where we really need to put the pedal to the metal.”

Some analysts, though, question WorldCom’s chances of competing in the lucrative SMB market, where the company faces increased competition from regional Bells. Now that the Bells can sell long-distance services in most of the states, competitive carriers like WorldCom are no longer the only ones that offer attractive service bundles of local and long distance (see RBOCs Get Long Distance Go-Ahead).

One source says WorldCom's designs on the "small" part of the SMB market are doomed. “They’re going to try to defend [the small business market] but it’s fruitless,” says Guzman & Company analyst Patrick Comack, pointing out that the RBOCs are taking large market share with small business customers. However, he says, the medium-sized business market is protectable, and he notes that “[Capellas] didn’t show much concern about [WorldCom’s] larger customers. That should be comforting to investors.”

WorldCom’s planned push into the SMB market has at least one observer speculating that the carrier could be planning to abandon the consumer market altogether. “The consumer unit at WorldCom is history,” says Phil Jacobson, an analyst with Network Conceptions LLC. “It looks like they may get rid of their voice-oriented services.”

The fact that Capellas also said today that WorldCom will be strenuously going after consumer customers in the next 100 days doesn’t hurt this theory, Jacobson claims. He says WorldCom is probably trying to raise the value of its consumer business as much as possible, in addition to giving a kick to its competitors, before announcing that it’s for sale. “They’re trying to create as much value, and as much pain, for the RBOCs as possible,” he maintains.

Capellas's drive for new customers, wherever they come from, seems key to the carrier's future. He said WorldCom will try to bag 1 million more customers for its local and long-distance Neighborhood package, as well as 2.5 million more long-distance sales before filing its plan.

There could be a regulatory explanation for WorldCom’s aggressive wooing of customers (see Will Powell Pull the Plug?). At a time when it appears that the FCC may decide to dramatically reduce the access competitive carriers have to the unbundled network element platform (UNE-P), CLECs should try to grab as many UNE-P customers as possible, says Farooq Hussain, also with Network Conceptions: “I would say it’s open season." CLECs, he notes, won't be forced to give customers back if UNE-P is abandoned.

In addition to attempts to gain new ground with customers, Capellas said it's imperative for WorldCom to regain credibility with investors. Last July, WorldCom filed for the world’s largest bankruptcy and saw its reputation crumble amid a $9 billion-plus accounting scandal.

“I know we need to rebuild trust,” he said, admitting that some people will be asked to leave the company following its implementation of a new "zero-tolerance" ethics policy. “In everything we do, we have to promote accountability."

WorldCom also unveiled a new management team:

In addition, Victoria Harker will act as CFO until someone can be found to take on the position permanently, Capellas said.

— Eugénie Larson, Reporter, Light Reading