WorldCom - the winners and losers

Rival telcos lick their lips...

Following the demise of KPNQwest, rival companies, including WorldCom, were licking their lips at the prospect of hundreds of new customers looking for new service providers. Many telcos have formed dedicated sales teams devoted to poaching ex-KPNQwest customers after the company went bankrupt. Now that WorldCom is following in KPNQwest's footsteps, industry analysts Meta Group are advising WorldCom customers to get out as soon as possible, ideally before the group files for bankruptcy (assuming it does), when negotiating their way out of contracts would become extremely difficult. Equant, seen as one of WorldCom's main rivals, saw its share price rise over 15 per cent today as investment bank Julius Baer upgraded its stock from a 'reduce' to a 'buy'. Many rival stocks, which were caught in the general downdraft that hit the markets yesterday, actually bounced back today as stock dealers realised the news could be good for the the sector. The rising tide of telecoms bankruptcies will lead to a general rise in prices, the Meta Group said. It said: "Telecom pricing will broadly increase within 12 to 18 months as this market implosion comes to its natural conclusion, with fewer remaining carriers and reduced competition. "However, during the implosion period, prices will continue to drop as stronger competitors drive weaker competitors from the field, starving them of cash flow by competing with lower prices." Cable and Wireless is trying to woo customers who have been stung by telco bankruptcies with its strong balance sheet. At the end of March, Cable and Wireless had a £2.6bn net cash surplus. Colt Telecom, which is backed by US investment house Fidelity, also has a £1.2bn cash pile. It has been taking advantage of the despair in the sector to buy back its own bonds at a discount. BT, which controversially lost out in the battle to take over MCI in 1998 resisted the temptation to gloat over WorldCom's woes. At the time, WorldCom's disgraced former chief executive Bernie Ebbers joked that he would one day take over BT. BT would not confirm any interest in buying WorldCom assets. However, BT Ignite, the division which competes most directly with WorldCom, does have a sales team in place to target WorldCom's customers, a spokesman said. One rival which hasn't benefited from the debacle is Qwest, which is also facing an investigation from the Securities and Exchange Commission, and has been widely tipped to become the next big telecoms failure.