Nice Summary of WCOM's Aggressive International Plans:
WorldCom Making Plays For Lead On World Stage
Investor's Business Daily
April 14, 1998
Author: Reinhardt Krause
Scrappy WorldCom Inc. is charging into the global phone
market as much bigger rival AT&T Corp. struggles to find its
footing.
In March, WorldCom closed two big deals and acquired new
service licenses as part of its global push. The moves help
spread its marketing reach into Asia, Latin America and
Australia - just as its costly buildout of a fiber-optic network in
Europe starts to pay off.
''We're making huge investments in Europe, building
enormous amounts of capacity,'' said Colin Williams, chief
executive of the company's U.K.-based WorldCom
International unit.
''We're off and running in Sydney, we just got a license to
build a network in Tokyo and we're active in Singapore,'' he
said. ''The only place that's urgent for us, where we're
struggling a bit, is Hong Kong.''
WorldCom is building an advanced phone network worldwide
to carry the Internet's soaring data traffic, as well as phone
calls.
WorldCom's most recent steps on the world stage include
signing up partner Telefonica de Espana S.A. of Spain,
Europe's second-largest carrier, behind British Telecom PLC.
Their EuroCom joint venture will let WorldCom expand in
East Europe and Latin America.
WorldCom last month also became the first foreign carrier to
win a license to offer domestic phone service in Japan. It
positions the company to go head to head against Japanese
leader Nippon Telegraph & Telephone Corp.
To boost that effort, WorldCom in March also said it's
partnering with Japan Telecom Co. and four other carriers to
build a trans-Pacific undersea cable. The companies plan to
spend about $775 million on the project.
Analysts note the moves.
''WorldCom is already doing better than AT&T with the
Internet,'' said David Roddy, an analyst at Deloitte & Touche
Consulting in Washington. ''Now they're making lots of
progress on the international front, which would give them a
lot of long-term strength.''
Outside the U.S., WorldCom revenue rose 74% in '97 to
$818.5 million. This year, its overseas sales should grow
another 60% to $1.39 billion, says Merrill Lynch & Co.
And all this WorldCom growth is before it buys MCI
Communications Corp., the second-largest long-distance
carrier in the U.S.
That merger - which would be the largest ever - is slated to
be completed later this year. But the $37 billion joining of the
two major telecom firms is being scrutinized by regulators in
the U.S. and Europe. The European Commission has
extended its review to include WorldCom's market share in
Internet backbone services. Backbone refers to the
infrastructure that makes the Net run.
MCI would give WorldCom a market presence in Mexico,
Canada and New Zealand.
Still, Jackson, Miss.-based WorldCom faces tough rivals that
also are expanding globally.
Onetime MCI suitor British Telecom soon may partner with a
big U.S. ally, possibly Bell Atlantic Corp., industry analysts
say.
Another rival is Global One, an alliance of Sprint Corp.,
Deutsche Telekom AG and France Telecom S.A.
Global One, however, still is a big money loser. It named a
new CEO late last year to improve operating results.
Then there's AT&T. Under new Chairman C. Michael
Armstrong, it's revising its global strategy.
But WorldCom likes its position compared with its rivals.
''AT&T has been very slow out of the box,'' WorldCom's
Williams said. ''Global One is getting very nervous about the
losses they're incurring.''
AT&T is seeking new partners abroad, Armstrong said at a
recent Merrill Lynch conference in New York. But AT&T
wants to ensure corporate customers that service is
consistent from country to country.
''We need to maintain some degree of control over a global
network architecture,'' Armstrong said.
In Europe, AT&T's main alliance is Unisource NV - a joint
venture with the dominant phone carriers of the Netherlands,
Sweden and Switzerland. Telecom Italia SpA also has been
in talks with AT&T to join the Unisource alliance. In Asia,
AT&T this week named a new head of its AT&T Japan Ltd.
unit.
WorldCom, though, since '93 has spent about a billion dollars
- outspending AT&T -building a fiber-optic network in Europe.
In July, the fiber network will link financial centers in London,
Paris, Frankfurt, Brussels and Amsterdam.
The network later will connect other major cities in Europe.
WorldCom also has partnered with Cable & Wireless PLC to
build an undersea cable link between London and New York.
Europe's telecommunications market was opened to more
competition on Jan. 1.
''We think we're very well positioned in Europe,'' said
Williams. ''We recognized the importance of the last mile
(connections to customers). We own it.''
WorldCom's largest customer base in Europe is the U.K.
There, it's the third-largest carrier of international business
traffic, behind BT and Cable & Wireless.
AT&T has always worried Europe's carriers, which wanted to
protect their markets from the U.S. behemoth. AT&T handles
the most international communications traffic of any U.S.
carrier.
But WorldCom may have slipped under the radar screen of
Europe's carriers.
''Deutsche Telekom fought AT&T coming into Germany, but
they never thought WorldCom would be a threat,'' said Kevin
Moore, an analyst at BT Alex. Brown in Baltimore.
The Telefonica alliance is one sign that overseas carriers are
seeking out WorldCom as a partner, analysts say. Finding an
ally to help crack Japan's phone market is now key for
WorldCom, Moore says.
Telecom Japan could be one suitor. But WorldCom is biding
its time before cutting a deal in Japan. Williams says
WorldCom prefers to first gain more licenses in Japan so it
can negotiate from a position of strength.
As WorldCom molds a global network, it's laying the
groundwork to boost sales. Its fiber networks and undersea
cables could ease Internet congestion. But business
customers should expect to pay for global high-speed
services, Williams says.
''Today if you're sitting in Germany and want to access a Web
site in the U.S., you may have to wait five minutes,'' Williams
said. ''Business customers don't want to do that.''
(C) Copyright 1998 Investors Business Daily, Inc. |
