FWIW...Long distance price wars too costly?
Nightly Business Report, Wednesday, August 11, 1999 at 21:37
LINDA O'BRYON: Well, the cost of calling is falling. The nation's long
distance phone companies are cutting prices these days as competition in the
industry heats up. But as Stephanie Woods explains, even as carriers get the
word out, there are still concerns over how low prices can go and still be
profitable.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The message investors
got: a price war is in the offing. MCI/WorldCom, QWest (NASDAQ:QWST) and Sprint
(NYSE:FON) have all announced new low rate consumer plans. The goal is to sign on
new customers and entice them to call more. But low rates for consumers could
spell trouble for some companies' bottom lines.
SCOTT CLELAND, DIRECTOR, LEGG MASON PRECURSOR GROUP: What's a problem with
the price war is everybody has that same psychology, and nobody gains more
customers, and everybody gets less revenue.
WOODS: Analyst Michael Weaver says the large diversified carriers, like
MCI/WorldCom and Sprint should be able to take a hit in their consumer long
distance profits, as long as business and Internet use remains strong. But
the mid-sized carriers, like IXC (IXCC) And Frontier (NYSE:FRO) may have more
difficulty handling price declines.
MICHAEL WEAVER, ANALYST, DUFF & PHELPS: It will be difficult for most
carriers to maintain or grow to the extent that they have in the past their
consumer business with this type of pricing environment.
WOODS: A glut of capacity is what's driving prices down. QWest, IXC, Williams
and Level 3 (NASDAQ:LVLT) have built new networks and have lowered prices to get
traffic, including Internet and data services onto their networks. And expect
even more competition once the local phone companies like Bell Atlantic (NYSE:BEL)
and SBC (NYSE:SBC) are given the go ahead to by regulators to offer long distance
service. But even with all this capacity, most observers expect profits to
remain strong.
BRIAN HAYWARD, INVESCO TELECOM. FUNDS: There are applications that will be
available once high speed access is available in the local part of the
network, the last mile, that the large bandwidth that we see in the long haul
networks will be consumed.
WOODS: So far, AT&T (NYSE:T) hasn't entered this latest consumer price war, but
many analysts expect it will. Stephanie Woods, NIGHTLY BUSINESS
REPORT, Washington.
Nightly Business Report transcripts are available on-line post-broadcast.
The program is transcribed by FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessarily
represent the views of Community Television Foundation of South Florida, Inc.
Nightly Business Report, or WPBT.
Information presented on Nightly Business Report is not and should not be
considered as investment advice.
(c)1999 Community Television Foundation of South Florida, Inc.
|
