Beginning of soliloquy.
This is just from a long term buy and holddd point of view.
WCOM is a stock I expected to retire on, BUT for the first time I have doubt.
Why? Cause the "bandwidth revolution" (xdsl/cable) changes everything and I do mean everything!
Proceed only if you are a long term thinker:
1. The coming bandwidth explosion is completely unpredictable. Within the immediate future (5 yrs), how big will your pipes need to be to serve this bandwidth; what applications will drive the bandwidth? If one believes completely in this bandwidth revolution (as do I). Then one thing is certain the fatter your pipes the better. Conclusion: Worldcom's pipes aren't fat enough. Only T lags behind them. So, what does this mean...WCOM's got to get bigger pipes....NOW!
How?? a) Physically laying higher capacity fiber, which will be extemely costly and most significantly TIME CONSUMING; b) Purchase capacity by merger with the likes of QWST, WMB, etc., which again will be extremely costly given the high valuations and debt loads of these candidates, but considerably LESS time consuming; c) Throw all your marbles into DWDM technology, i.e., CIEN (I say buy the company NOW while its valuation is low). This option will be cost and time efficient!!! A bit of gamble if not managed properly. The key here is to manage the upgrade of your core network equipment and at the same time laying higher capacity fiber while managing to stay ahead of the bandwidth curve and providing your customer with the latest and highest level of services. Management is the key and that means Skidmore.
2. It is without question that WCOM has dropped a couple of balls. I attribute some of this to WCOM's recent acquisitions, specifically MCI. Large task to integrate these companies in an efficient manner. Takes a lot of focus. In other words they may have taken a moment to catch their breath or perhaps not a moment to breath at all. BIG mistake!
The alternative would have to do with the "vision" thing being bandied about in this thread. OK, who's got the vision, Ebbers or Skidmore? Maybe neither. Simply put Ebbers, the man who started the whole thing, definitely has a knack for smelling a business opportunity. He's dealt his way to the No. 2 long distance player. Incredible feat. It is w/o doubt that Skidmore/Uunet hipped Ebbers to the changes beginning to sweep the industry re data, the Internet and IP, etc. at the time of that merger. Together they have made a GREAT team. But do they have a complete vision?? Has MCI distracted that vision?? How badly has this lack of or distraction of vision harmed WCOM's strategic placement in the industry?
My initial thoughts are, rather significantly in these two areas. T has upped the ante by bringing the future closer sooner. Quite simply the "vision" is ONE company providing to its customer (be they commercial, residential or both) FULL, COMPLETE, END to END data, voice, internet and multimedia services WORLDWIDE. This is the end game and the goal is to get there firstest with the mostest.
T is now in front and slowly pulling away.
2. I'm being a bit wordy so let me get to it, the past and present fight has consisted of (I'll forego the Telecom Act jargon) new up and coming "long distance" players (MCI, WCOM, LCI, etc.) building out new long distance networks and for all intensive purposes it can be said this is complete. During this period T the incumbent player had little option, but to watch as these companies chipped away at its business.
At the same time there's the local market with the RBOCs dominating the local loop with a handful of small companies attempting to bypass the local loop and provide local service primarily to large commercial customers where the investment in CPE made it economical. Most of these small companies have been snapped up by a number of players.
Summing up, what we have here is a handful of players dominating long distance; the RBOCs; and a scant few, as well as, some of the long distance telcos attempting a very costly and time consuming local loop build outs. Sprint stands out here.
All of the above are dying to provide a long distance and local service package, but at present are being prevented from doing so by government regulations (I presume we're all generally familiar with this).
Attempting to sum up again, long distance companies with their fat or relatively fat pipes need the local loop providers (RBOCs) in order to feed their pipes. The RBOCs, frankly, through their control of the local loop CONTROL the customers be it residential and/or commercial. Now, lets say you mange to get to those customers firstest with the mostest then you lock them up and feed them to your nice fat long distance pipe while your competitor(s) sit with underutilized/empty pipes, high debt service and scratching there heads.
Firstest with the mostest that's the key.
Or if your a RBOC and you get yourself a nice fat long distance pipe then you can get to YOUR customers firstest with the mostest.
So the question is who's positioned to get there First, and who's got the most??
IMHO, T has, simply put, LEAPED ahead of WCOM and the others. 60% of the country (I forget if that's with Mediaone or w/o) (what percentage is it now with the Comcast deal and if they make the deal with Time Warner?). They either own the local wire outright or have a deal in place. Ok, so they gotta upgrade the plant, we'll get to that later. Right now not a single solitary player can boast this potential capability.
Now, the kicker with this is that with this local loop they get to package "multimedia" content as well (remember MOSTEST). No question, T alone (at the moment) is positioned to be FIRST and with the MOST.
Now, all the players who get it, have got to be simply rocked by the speed and determination T has shown. Clear vision being exhibited hear. T has thrown down the gauntlet. They have said we believe in our vision and are about implementing that vision as expeditiously as possible. Every serious player must NOW similarly define their vision and execute it forthwith. To not do so means one runs the risk of T's vision being a correct one and its execution being efficient, while others fumble for a vision and/or hedge their bets.
Well, who's CLOSEST and what do they have to offer?
Again IMHO, only two players (at present) are positioned to make the necessary moves to match T. Only one of which has demonstrated a vision as far reaching as T. Also, I consider two other plays to have a core capability that with additions could possibly compete with T.
The No.1 candidate is BEL! Look at what they've done, but first let's look at what that didn't do. They DIDN'T merge with TCI when they had the chance at the dawn of the "Information Superhighway". Frankly, the timing just wasn't right, but it does exhibit that each BEL and TCI have "vision".
Since then BEL has deliberately gone about locking up the local loops of virtually the ENTIRE east coast. Think on this, at present they "OWN" the most lucrative telecom customers in the world! In a real way it could be argued that BEL is the strongest positioned, strategically placed, telecom on the planet. Think of the inter-company "long distance" business generated within their little local loop consortium, but lets look long as in distance.
Is there any long distance provider that wouldn't want to have access to this customer base? Nope. Want to own this base. Nope. Is there a company that could afford to purchase it?? Hmm....not many, but a merger is possible. Who's the got the appropriate long distance network and fiber pipes to marry with these loops?
Hmm......this brings me to the No. 2 candidate WCOM and the meat of my soliloquy. Above I've already discussed WCOM's pipes, distractions and possible lack of vision, but before I get to the meat let's talk wireless and by this I mean "mobile" network. WCOM MUST have wireless!!!! Why?? Wireless equals mobility. It is part of the mostest equation. Not only will a company be compelled to provide local service with its long distance or vice versa, but also mobility. This means never, ever being out of touch with the ability to communicate "at will". It also means having ONE number rather than say one each, for work, home, cellular and yet another when on the road (hotel). We've all read the information superhighway hype, well its real, just taking a little longer that's all.
Think on this one. Would you purchase say local and long distance from one provider and your mobile service from another if you could get all three from yet another provider. Probably if its more economical, but would you pay a premium to the third if it could provide you with a single phone number? What if such were provided at a discount reflecting the synergy savings the provider benefits from owning or controlling local, long distance and mobile infrastructures. Think of the cost and service packages that could be made by the third provider. The first two providers could only compete on a price basis alone. A mobile/wireless service may not be necessary for WCOM at this instant, but real, real soon.
Now to the meat. WCOM needs local loops and they need them NOW!!!!!!!!! Off the top of my head, I'd wager that local loops are infinitely more important than a European presence/network. Let me say this once again....Local Loop equals CUSTOMERS....Customers are TIED to their local loop. [Residential customers a little more so than large commercial ones, because they can afford to make an investment in CPE to bypass the local loop (but there are weaknesses here too), BUT small and medium businesses are tied.] RBOCs OWN the local loop...RBOCs OWN the customers!!!
At present, what long distance or RBOC has access to the local loop/customers AND could provide them with long distance service, wireless mobility, high bandwidth internet access and services, business and entertainment "multimedia" content??? Only one .....T. Consider the service packages that could be provided with the above staple of services. T is king of packaging. Let's all say "AT&T One Rate". Already, T has a million customers that are "high probability" users easily migrated to the above services. One Rate is simply a precursor to what is on its way. Ohhh...while we're at it lets say MCI One as well.
The long distance telcos need access to the customer/local loop. The only way to obtain access is to build, buy or deal. T's recent moves have virtually eliminated the option to build, there just isn't time to do so on a large enough scale to compete with T. This fact puts Sprint in an EXTREMELY precarious position, IMHO. The buy option requires either mountains of cash, incredible stock valuation or both. IMO, it is questionable whether its possible to deal your way into a competitive position. Consider Sprint/DT for example. In any event, its a risky strategy to bet the company upon and would require a leader with extraordinary negotiating abilities.
Given the above how does WCOM procure local loop/customers? Let's eliminate deals, don't like the idea and will sell if this is the strategy. It's a loser. Building in a conventional way primarily is too time consuming, EXCEPT...for one possibility. Broadband point to multipoint wireless (I won't get into the technicals) (satellite may be an option as well), this technology allows a long distance provider access to customers while bypassing the RBOCs' local "wire" loop. Question here is whether WCOM or anyone else has the guts, vision and cash to pull it off. I haven't looked at Broadband Wireless in a while, but the name bandied about most in this arena is Winstar. In addition, there's a little company called CelluarVision that holds a couple of patents and has made small in roads within South America and such.
IMHO, Broadband Wireless would be an excellent move for several reasons. One, the time factor would most probably match that of T's necessary cable "upgrade" build-out. Just as with cable there are a few kinks that need ironing out. Most importantly, WCOM can use its stock as currency to acquire properties that would equal in scope (near monopoly) of T's cable properties and agreements. Control and ownership are keys. Also, as many, if not all, the Broadband Wireless companies are actually "Wireless" cable operators and consequently WCOM would gain access to "multimedia" content. Lastly, WCOM gains access to the technology and could develop and deploy it across the world (specifically the high growth Asian markets) bypassing existing local loops where they exist and creating a cost effective local loop where it doesn't and consequently putting the "world" into Worldcom.
Such moves would demonstrate a clear vision and restore my faith in WCOM.
In the alternative, there is a prospect that makes me drool. How about a BEL and WCOM merger???? This would be an extraordinary feat if it happened; and one that would give T the shakes. Question, first of all, would the government approve??? I think a concession or two might be in order regarding CLEC access to BEL's local loop. BEL resistance to such would fade under such a merger. Why?? Because BEL wouldn't care, WCOM's long distance along with BEL's east coast local loop consolidation gives it a huge competitive advantage not easily duplicable by the CLECs (there's even a little more to this, but I'll keep moving).
Now, how do these two pieces fit together?? Quite nicely it would seem, but there are a couple of holes. Who's going to be top rooster in this hen house?? Ebbers, Skidmore or (I forget who's top dog at BEL). Perhaps, it'll be time for Ebbers to cash in and OUT. I wonder if his entrepreneurial spirit would fit with this more corporate company in a soon to be maturing industry. The wild and wooly days of the 1980s and 90s will be coming to a close. Skidmore would probably continue to do what he does albeit on a larger scale. Anyone want to make a guess at what this company would be called?
Of course Bell Atlantic Worldcom would have to spend BEL's cash to expand BEL's mobile network nationwide, bring xdsl to its FULL fruition, upgrade the core network, acquire multimedia content AND possibly begin the build-out of FIBER local loops (think the government will like this---we're talking handstands here). This last move would one up T and truly harbor in the new millennium.
End of soliloquy.
Well I'm not called John Coltrane for nothing...totally out there all alone....
P.S. the four companies are 1) BEL 2) WCOM 3) QWST 4) FON |
