Powell To Bells: Please Buy WorldCom
Mark Lewis, 07.15.02, 12:19 PM ET
NEW YORK - Michael Powell has a problem, for which he has devised an elegant solution. The problem is WorldCom, the long-distance giant now tumbling toward a Chapter 11 filing, which potentially might disrupt the telecommunications service of millions of customers. Powell, as chairman of the Federal Communications Commission, is eager to avoid any such disruptions, so he has invited the Baby Bells to solve his problem by buying WorldCom on the cheap.
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Powell's invitation was delivered today in the form of a front-page interview in the Wall Street Journal with the eye-catching headline "FCC's Powell Says Telecom Crisis May Allow A Deal To Buy WorldCom." Powell did not explicitly ask the Bells to bid. But he suggested that the FCC would look benignly upon consolidation that resulted in fewer but stronger players, as has happened in recent years with the defense industry. If a Bell sought approval for a WorldCom (nasdaq: WCOME - news - people ) deal, federal regulators "would take into consideration the duress and state of the market," he told the Journal.
Indeed, one of the Bells probably will buy WorldCom--eventually. But despite Powell's comments, none of the Bells will be opening their checkbooks anytime soon, because WorldCom's accounting situation remains too murky. Bernstein analyst Jeffrey Halpern points to other factors that might inhibit a Bell bid for WorldCom, including the fact that it would complicate the Bells' current efforts to win long-distance approval on a state-by-state basis within their respective regions. But the biggest thing standing between any of the Bells and a near-term WorldCom bid, Halpern says, "is really that they don't know what they're buying."
They know what they want to buy--WorldCom's corporate business, which is much more tempting than its MCI consumer long-distance business. "WorldCom brings a turnkey entry into the corporate market for any of the Bells," Halpern says. The smallest Baby Bell, Qwest Communications International (nyse: Q - news - people ), has accounting problems of its own and is in no position to make a bid. But Verizon Communications (nyse: VZ - news - people ), SBC Communications (nyse: SBC - news - people ) or BellSouth (nyse: BLS - news - people ) might conceivably end up with WorldCom's assets after the dust settles.
Halpern says that Verizon and SBC may be the Bells best positioned to benefit from a WorldCom combination because they have made the most progress toward entering the corporate market. But from a balance-sheet perspective, he says, the two Bells that could best afford a WorldCom bid are SBC and BellSouth.
You are so very correct flip. The tragedy in all of this is that our public commissions, courts, judges, and regulators, congressional representatives, do not understand how it works either, and they make the rules. Most people think of telecom like they would the electric company. There's a line out there, just hook on a transformer and wind it down into my house. It is nothing like the electric company, the cable company, the water company, a computer company, or any other business. A good understanding of the telecom sector is needed. The people who make rules and regulations and judgments about this industry don't have a clue....if they did...their own decisions would scare them to death.
Communications were of such vital concern during WWII that T and the rbocs were merged into one entity by the federal government for national security reasons. Most people do not understand that that is how they got that way in the first place. We are in a war now, and thank God the United States if not depending on WCOM to connect us. It is amazing that our government awarded contracts to WCOM......our own defense. Is that scary or what? The FAA did not award their contract to WCOM, but went with some company in Florida. I don't think they even understand that all major lines are connected through the rbocs and T. Those lines go down and every clec riding those lines goes down. I guess we would all like to feel those towers will just send and receive signals and protect our cellphone communications. They're just targets for storms, or something worse. Cellphones only work as long as the towers are standing. I know there's GPS, but something has got to receive those signals from space. Hopefully someone with some real power will get the message...but I doubt it.
Buy the Weakness in SBC and BLS hopfully at the Open, money from INTC and IBM will need to find a Home after the Weak open and i figure that SBC and BLS are the Safe Haven for Desperate Fund Money to Rotate to, i kind of Leaning more to BLS and then SBC, weak open and then a Good Close on these 2, good luck
My current assignment in the world of telecom lends some credence to your fine prose. Your sense of calm is admirable and I respect that.
The current state of things is very messy. I can vouch for that, even though there are some who may think my way of expressing it is quite odd. Your insight is valuable and similar to 'a calm lake in the early morning'. I just had to embellish-really though your insight is appreciated.
Wendy, Thanks for writing that, I just do not like typing much, but I was thinking that last nite and just did not want to go into it all again. To add to it all The average person today just does not know what it cost each and everyone of them to break up the system. I know you remember rates rose about double in a very short time because it now takes Many times the facilities and carriers to just carry local conversation due to Dac"s. If most people know how communications worked today versus 30 years ago with the routing and the high cost to get that done They would be speechless, but most people do not know how a communications systems works. I have sat down and drawn it on paper for folks who really wanted to know, and still they say, Oh it can't be like that. Last but not least the phones of today if you get 6 years out of them you are fortunate. The old equipment was made to last 50 years. I have two in my house that still work great and were made in 1939. Good luck
Wendy, while there are times when we differ, you are beautiful on this post. Everyone
should read it in detail and understand how
Telecom got in such a mess.
Under the disguise of competition there were
many clec's formed for the sole purpose of
picking off the profitable business accounts
and this left the residental customers to
cover all of the operating expenses.
My guess is that VZ will eventually pick
the bones of WCOM, SBC will get what is left
of T after Comcast is spun off, and Sprint
will go to BLS.
Again, thanks for telling it like it was.
>>Yes, T was the only act in town. The average customer could care less, one stop shopping and good service. etc. etc. etc.
Great message Windy ! Having to pay close attention to the CLEC's because of the fines associated with service delivery to them, kinda leaves the other customers in the back seat doesn't it ! Funny the CLEC's don't have measurements and fines associated with the services they provide !
Gee, wasn't MCI, part of wcom, one of the folks that brought the Bell System to the anti-trust suit in 1984? What a shame! Now you have to go "dark" soon! Should have left us alone. And the US markets would be a better place for it! See what you have done for the American Markets? Your greed has caused billions of losses! Wcome, too bad...LOL
Yes, you are correct. MCI helped disintegrate T from the rbocs effective 1984. WCOM later bought MCI. WCOM has been riding piggyback T and the rbocs since that that with no one to account to, basically left to run free and do what they want. In the meantime, T and the rbocs has had judges, commissions, and everybody in the legal system rule against them and highly accountable for everything they do. WCOM and the other leaches on T and the rbocs have no accountability and ......well you see the outcome. You can rest assured it's not over yet.
How OLD are you? It's 2002, man, get over it! 1984 was like 18 years ago. You're a total moron...Greed had nothing to do with the anti-trust case. And you should talk. SBC? Can YOU say greedy monopolist? Get a clue, dude.
It makes no sense to buy WCOM while it is intact. Now, if SBC could buy the UUNET without buying the WCOM name, then I'd say, "GO FOR IT!"
Remember, if you buy the WCOM name, you buy the lawsuits against it.