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To: Johnny Canuck who wrote (39868)	7/8/2003 8:19:51 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71882

WorldCom's Forecasts Signal Sector Woes Tuesday July 8, 5:34 pm ET By Jessica Hall PHILADELPHIA (Reuters) - WorldCom Inc. slashed its growth forecast through 2005, but its dreary outlook might be more a harbinger of pain in the telecommunications industry than a commentary on one company's challenges as it tries to emerge from bankruptcy, analysts said on Tuesday. ADVERTISEMENT WorldCom, the No. 2 U.S. long-distance telephone and data services company, on Monday night cut its revenue forecasts, saying 2003 sales would decline by 15 percent to $24.5 billion, remain flat in 2004, and rise 2 percent to $25.0 billion in 2005. The Ashburn, Virginia-based company said its Chapter 11 bankruptcy has weighed on new sales in the first half of the year, while continued pricing pressures in the consumer and small business markets have hurt revenues. WorldCom, which plans to change its name back to MCI, also cited mounting competition as the Baby Bells hawk discounted local and long-distance service packages. Aggressive price cuts in the high-speed Internet market have also hurt reveunes, as has adoption of "do not call" legislation allowing consumers to escape telemarketing calls, WorldCom said. The confluence of these pressures has lowered small-business and consumer rates by up to 40 percent in key markets since April, the company said. WorldCom's "estimate cuts have significant implications for the broader industry, in our view, since the issues MCI references are generic to the industry and not specific to MCI," said Merrill Lynch analyst Adam Quinton. "In particular we see implications for AT&T, given its sizable exposure to the consumer LD (long distance) segment," Quinton said. Shares of AT&T shed 26 cents, or 1.3 percent, to close at $19.73 on the New York Stock Exchange (News - Websites). Long-distance carriers have been decimated over the past two years due to hefty debt loads, a glut of network capacity and slim spending by corporate customers. Pressure has intensified as the Baby Bells and long-distance companies entered each other's markets to slug it out for the most lucrative customers. "We see the consumer long-distance industry -- represented by AT&T, MCI and, to a lesser extent, Sprint -- as the first casualty in the fight between the Bells and the large cable (companies) ... for household telecommunications spending," said UBS Warburg (News - Websites) analyst John Hodulik. To attract and retain customers, the Baby Bells have set rock-bottom prices, despite potential erosion of profit margins. That will likely force rivals to follow, leading to a downward spiral for the already suffering long-distance carriers, analysts said. "When the 800-pound gorilla on the block finds it economically advantageous to give away the product that generates the majority of your earnings, you could be in trouble," Hodulik said. Another challenge looms as WorldCom and Global Crossing each emerge from bankruptcy with lighter debt loads and new management teams, putting them in a stronger position to battle rivals and cut costs, analysts said. "Consumer and small biz is seeing hyper-competition, which makes the industry a dying animal," said Greg Gorbatenko of Loop Capital Markets LLC. "The writing is on the wall, and it is in permanent ink," Gorbatenko said.