MCI WorldCom: Headstart In Europe Will Count Against Rivals
October 09, 1998 8:01 AM
PARIS (Dow Jones)--MCI Worldcom Inc. (WCOM)
has a one- to two-year head start over its European
rivals in the supply of high-capacity telecommunications
services which won't keep pace with demand in the
foreseeable future, John Sidgmore, vice-chairman of the
U.S. telecommunications group, said Friday.
As MCI Worldcom prepares to double the size of its
European network in the next 14 months, Sidgmore said
plans by companies such as France Telecom (FTE) and
Deutsche Telekom (DT) to build new broad bandwidth
capacity are "a good strategy," but one that follows MCI
Worldcom's lead.
MCI Worldcom has "a pretty significant advantage," he
said at a news conference. France Telecom, Deutsche
Telekom and U.S. partner Sprint Corp. (FON) plan to
build a European backbone network to be completed in
2000, one of a number of pan-European telecoms
projects underway.
Sidgmore said established telecoms companies face a
sharp decline in the "traditional" voice traffic sector
which makes up much of their business, partly because
half of that traffic is fax communication, likely to be
available on the Internet within a year.
The major potential threat to MCI Worldcom's
expansion plans would be a failure to put projects such
as the expansion in Europe into action, Sidgmore said.
Currency volatility, such as the dollar's recent plunge
against the yen and Deutsche mark, will have no material
impact.
"There are always risks with aggressive business plans...
and we're betting a lot of chips on this strategy," he said.
"But I don't see any market risks... I see execution
risks."
B> Small Delay To Project
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Sidgmore said the company's existing network in Europe
was completed in August, around 20 days behind
schedule, a delay which isn't unreasonable for a
14-month project.
MCI Worldcom, the company created by the merger of
WorldCom Inc. and MCI Communications Corp., said
earlier this week it will expand its European network to
6,864 kilometers from 3,200 kilometers within the next
year-and-a-half.
The expanded intercity phone network will provide
national coverage in the U.K., France and Germany, as
the company continues to invest around $1 billion a
year, mostly in Europe.
Although MCI WorldCom is the product of more than
68 mergers in the past four years, the recent merger
between MCI and Worldcom is a stiffer challenge for
ensuring the company maintains its level of service,
Sidgmore said. The merged company has a staff of
75,000 and 22 million customers worldwide.
Sidgmore said there is no chance of a glut of bandwidth
capacity in Europe or internationally as competition for
meet the demand for data communication via the
Internet heats up.
"If you buy our view that bandwidth demand is
growing... at 10 times a year... everyone has to build 10
times more capacity just to stay even," Sidgmore said.
-Matthew Curtin; 33 (0) 1-5300-0303;
mcurtin@ap.org
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