WorldCom Making Plays For Lead On World Stage
Date: 4/14/98
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.[Nice ASND customer]
''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.
Metadata: WCOM T BTY MCIC BEL FON FTE
I/4891 I/4811 E/IBD E/SN1 E/TECH |
