WorldCom Inc's bankruptcy filing Sunday delivers a body blow to a sector already reeling from tumbling revenues, fleeing customers and shrinking long-distance rates.
The company is tottering under more than US$30 billion in debt and the recriminations of an accounting scandal.
PHOTO: REUTERS
Everyone connected to WorldCom -- competitors, employees and suppliers -- now await the pain.
"This isn't going to be a ripple on a pond. It's a tidal wave from a boulder," said Jeff Kagan, a private telecom analyst in Atlanta.
For suppliers and creditors, it's the possibility that WorldCom's debts might be wiped away by a bankruptcy judge.
For competitors, it's the pain of losing investors fleeing all things telecom.
For WorldCom's 63,000 workers, there are acute worries about future employment.
"This is a case of lose-lose," said Scott Cleland, chief executive of the Precursor Group, a telecom research firm. "It's like a virus that gets spread to everyone. Suppliers get shortchanged. People who do business with them get shortchanged. A lot of bad debt will get absorbed."
The one group that probably won't have to worry is WorldCom's telephone customers. Even if the company fails, authorities say its networks will keep operating until they are sold, or while the company works out its troubles.
"I don't think customers will notice much," said Forrester Research's Carl Howe. "After a while you may get a different logo on your phone bill."
Many doubt the WorldCom name will survive long.
"They're a criminal brand, in the same group as Enron," said Patrick Comack, a telecom analyst with Guzman & Co. "I question whether WorldCom is a viable company, even without its debt."
Down the road, however, a world without WorldCom could turn into a friendlier place for the remaining US telecoms.
"This is going to be the big event that we're going to look back on and say `That was the turning point,'" said David Willis, a telecom analyst with the Meta Group.
Beleaguered long-distance carrier AT&T Corp might feel some relief, especially if WorldCom's most lucrative business customers start looking to jump carriers.
"It couldn't happen at a better time for AT&T," Willis said.
AT&T spokeswoman Eileen Connolly said the company has been phoning WorldCom's corporate customers to assure them that it will be glad to handle their business. Some customers have contacted AT&T on their own, Connolly said.
Sprint might also win some of those large customers, Willis said.
Elsewhere, WorldCom might pose a tempting takeover target for one of the four remaining Baby Bell carriers, especially Verizon and SBC, analysts say. The carriers are said to be among the handful healthy enough to purchase the assets.
One hot item could be WorldCom's Internet backbone unit, UUNet, one of the world's largest wholesalers of Internet capacity. UUNet is a solid revenue earner and crucial infrastructure provider, analysts said.
WorldCom's Metropolitan Fiber Systems, another network provider, and Web site host Digex Inc could also become coveted assets.
WorldCom's MCI long-distance unit might also be a takeover target, although its business, like that of AT&T and Sprint, has been losing business to local carriers entering the long-distance market, along with consumer use of e-mail and cell phone communications.
Some say the gobbling of WorldCom could set off a healthy wave of mergers, thinning the ranks of competitors. Ironically, the future playing field might revert to domination by the telecom titans of the past: AT&T and its Baby Bell progeny.
The worst case scenario for the industry is a WorldCom that sheds its debts in bankruptcy, only to resume aggressive competition -- reducing long-distance rates further in an attempt to gain subscribers, said Drake Johnstone, telecom analyst with brokerage Davenport & Company.
``That would be a disaster,'' he said.
Even at pennies on the dollar, WorldCom assets are going to be a tough sell among telecom survivors, Cleland said.
"The only players strong enough to consolidate have troubles of their own," Cleland said. "No one's willing to assume more risk and liability. This is an every-company-for-itself market. There is no quick fix."
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary
THUGGISH BEHAVIOR: Encouraging people to report independence supporters is another intimidation tactic that threatens cross-strait peace, the state department said China setting up an online system for reporting “Taiwanese independence” advocates is an “irresponsible and reprehensible” act, a US government spokesperson said on Friday. “China’s call for private individuals to report on alleged ‘persecution or suppression’ by supposed ‘Taiwan independence henchmen and accomplices’ is irresponsible and reprehensible,” an unnamed US Department of State spokesperson told the Central News Agency in an e-mail. The move is part of Beijing’s “intimidation campaign” against Taiwan and its supporters, and is “threatening free speech around the world, destabilizing the Indo-Pacific region, and deliberately eroding the cross-strait status quo,” the spokesperson said. The Chinese Communist Party’s “threats