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The Week at WorldCom

As WorldCom's struggle for survival shows all the signs of becoming a constant source of news, Boardwatch has decided to start a regular roundup of developments entitled "The Week at WorldCom."

Lets face it, this company isn't going down fast. In fact, one of the hidden strengths of WorldCom Inc. is that it's got a treasure chest of trading names, thanks to its past acquisition binge. When the name of WorldCom got a little tarnished, it reached into its wardrobe and pulled out the old MCI vestments (hardly worn!)

Now, perhaps, it's time for another change of garb. UUnet had a stylish look, didn't it? That should keep things going for a little bit longer.

Just to recap, WorldCom, or MCI, or... whatever, is currently under Chapter 11 bankruptcy protection, and AT&T Corp. (NYSE: T) has been campaigning for its liquidation.

In the latest development, AT&T has charged MCI with dirty dealings over “least-cost routing,” or shopping for the lowest charges from the terminating carrier. Although least-cost routing is common practice in the industry, MCI went about it in a way that unfairly landed AT&T with massive bills, according to Poor Old Ma Bell. "We're talking about the difference between shopping for bargains and shopping with somebody else's credit card,” says AT&T chief counsel James Cicconi.

The upshot was that on July 31, the U.S. government halted any further business with MCI until it had investigated its business practices. Since then, the two largest U.S long-distance carriers have been at each other's throats (see Government Bans MCI, MCI Hires New General Counsel, AT&T Replies to MCI's Reply, MCI Hits Back at AT&T).

So what's the impact on the Big Question of whether MCI should be liquidated or resuscitated?

As it happens Light Reading's Research Poll provides some insight into what the industry thinks should happen. So far, it's been taken by 243 people, and, on balance, it's bad news for MCI:

Who would benefit, on balance, from MCI being liquidated?

  • MCI's competitors (88 percent of respondents)
  • The reputation of the U.S. legal system (65 percent)
  • Investor confidence in the telecom industry (62 percent)
  • The telecom industry as a whole (58 percent)
  • The financial community (57 percent)
Who would benefit, on balance, from MCI being reborn?

  • MCI staff (80 percent of respondents)
  • MCI customers (66 percent)
  • Equipment vendors (60 percent)
  • MCI shareholders (58 percent)
  • U.S. Government (51 percent)
Finally, 74 percent of respondents think MCI executives should be liquidated "for the good of civilization." They mean that, of course, in the best sense...

To take the poll yourself and see the latest results, Click Here.

— Jo Maitland, Senior Editor, Boardwatch

skeptic 12/4/2012 | 11:37:19 PM
re: The Week at WorldCom The upshot was that on July 31, the U.S. government halted any further business with MCI until it had investigated its business practices.
--------------
This is misleading. On July 31, the government
proposed barring MCI from any *NEW* government
contracts. It does not affect existing contracts
with the government of which there are alot.

MCI has 30 days to respond and then the government
will decide if they are to be banned and how
long the ban will last.

BobbyMax 12/4/2012 | 11:37:04 PM
re: The Week at WorldCom Worldco9m is a criminal company and its behavior reflects the typical behavior of a US company. Its top management including its CEO continue to fraw a very huge salary although he has no expertise in any segment of the telecom industry.
This is what is called meritless appointments so common in the US businesses and government. It simply escalates the cost of dong business and does not inspire confidence to do business with the US companies.

Although WorldCom has lost its face, it is still generating enough revenue to meet the lavish expenses of the CEO and other high level management employees. The other companies in this category are 3Com, Xerox, Covad, Novel, Lucent, Nortel and thousands and thousands of other companies.

With this kind of bandit type of record, how can the US companies be trusted?
rjmcmahon 12/4/2012 | 11:37:01 PM
re: The Week at WorldCom With this kind of bandit type of record, how can the US companies be trusted?

There are many, many honest people who live by rules of integrity and lead US companies. Choose them and move on if one doesn't like the shenanigans of Worldcom or even some of the Wall Street games.
jnj 12/4/2012 | 11:36:59 PM
re: The Week at WorldCom liquidatation for Worldcon
sell the assets, the jobs will follow..if you make the terms of the sale that it must be sold as a ongoing concern you can assure many of the jobs and still get the benefits of consolidation..which is needed in the industry..
worldcom was corrupt and MCI wasn't mr clean either..they have their own skeletons..anyway a $11-14 billion dollar fraud needs the harshest of penalties...if the cops bust a chop shop, they don't let the owners declare chap 11 and the sell the business to new owners
Fiber_me_up 12/4/2012 | 11:36:49 PM
re: The Week at WorldCom When you say "sell the assets", who are you speaking to?

The owners/lenders make the decision on what to do with these assets, and they will (and should) do whatever is in their best interests.

FMU
jnj 12/4/2012 | 11:36:43 PM
re: The Week at WorldCom Fiber the owners(current) are doing what is in their best interests. The current owners are arbitrageurs that bought the bonds when the company went bankrupt.They bought the assets on the cheap and are using chap.11 as leverage to dump the shareholders and to pay pennies to vendors...these guys are gonna make a windfall if they can pull it off...
The only way to stop it is for the SEC or the Justice Dep't to force them into chap.7 and let the market buy the assets....if not they get a company with little debt and the ability to drive down prices and further damage the industry..
what would Verizon and SBC do? go chap.11 too?
Fiber_me_up 12/4/2012 | 11:36:42 PM
re: The Week at WorldCom "The current owners are arbitrageurs that bought the bonds when the company went bankrupt"

I'm not a big fan of this process, but it has nothing to do with their rights as property owners.


"The only way to stop it is for the SEC or the Justice Dep't to force them into chap.7"
I'm not an expert, but under our system, the government cannot force anyone to sell their interest in MCI. Again, it goes to the fundamentals of personal property rights.


"and let the market buy the assets"

Who sets the price? Who is the seller? Can you see that you are proposing the government inject itself into a financial transaction.

"if not they get a company with little debt and the ability to drive down prices and further damage the industry"

No evidence of this type of behavior. If the company is doing poorly before paying interest on debt, lowering price only makes the situation worse. New or current owners will not this to be a fundamental of their strategy. It is in MCI's interest to keep prices as high as possible. You may argue that it would be a market share play, but what type of customers would switch from ATT or Sprint to MCI? Certainly not attractive ones.

FMU
jnj 12/4/2012 | 11:36:39 PM
re: The Week at WorldCom FMU this isn't a big gov't interfering story..it's where Gov't agencies whose duty is to enforce the law leading to the end of a corrupt venture..look at Arthur Anderson..
the new owners would sell the assets via a bidding process, pay off fines and debts and pocket the rest..

as for fair competion..Verizon has $38b in debt, that's a lot, if Worldcom gets theirs written down to $5b who's in better shape to compete
and if they could sell service for half the price of Verizon and SBC, ATT who wouldn't take that offer..meanwhile the Gov't has given MCI $750m in new contracts, almost enough to pay their fine of $750m..and they want to take tax losses on the fraud!....remember this was a $14b dollar fraud..the biggest in history...that's a Big crime and now it's turning into a smooth deal for a few insiders
Fiber_me_up 12/4/2012 | 11:36:34 PM
re: The Week at WorldCom J,

Arthur Anderson...the owners determined that the assets had a certain value, and sold accordingly...the process should be similar for MCI.

You are looking at debt levels in a vacuum...how do they compare to the cash flow generated by operations? What impact will the reduced interest payments have on cash generation? If you look at these things, I think that you will see that the new shareholders would not support a strategy of competing on price.

The government can so a number of things to punish MCI (and certainly should), but "Liquification" them is not an option.

Shareholders/debtholders (probably including your 401K and/or pension) paid taxes on phony profits because of a handful of criminals....that tax money should be returned. If you accidently overpaid on your personal taxes because of a mistake, you would do the same.

FMU
jnj 12/4/2012 | 11:36:30 PM
re: The Week at WorldCom FMU i see what your saying but the shareholders are getting hosed and the bondholders sold to these new owners for pennies on the dollar..so what i'm saying is that the "New" owners have no interest in the old company and it's liabilties and responsibilities...these guys are not telecom folks..they even wanted Guiliani as CEO and settled with Capellas cause he has a good name..it's still a fraud
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