Right out of the gate, an MCI price hike

Don't assume that MCI's merger with WorldCom has less to offer on the international scene than its canceled merger with BT.

In Britain, BT has been losing market share to, you guessed it, MFS, a WorldCom subsidiary. Can we expect this trend to accelerate with the merger? Absolutely.

Today in the U.S., WorldCom has local networks in 86 metropolitan areas through its acquisition of MFS. And it plans to be in every city with more than 100,000 people. But WorldCom's real push is in Europe, all of which spells trouble for BT, France Telecom and Germany's Deutsche Telekom.

I expect to see a strategy that looks like this: First, WorldCom builds in every European country's capital. Then it targets major European cities with a population of more than onemillion. Then it enters South America.

The key to South America is Spain's Telefonica. Once an AT&T ally, Telefonica recently switched to MCI and has decided to stay aligned there. It will not really participate in Concert, which will stay with BT.

But the real key to MCI WorldCom isn't MFS, it's UUNET.

Why is WorldCom worth its multiple? Because it has hung together a gaggle of second-tier long-distance companies? No. Long-distance, even wholesale long-distance, is a modestly growing business. MFS? Perhaps, because running double Synchronous Optical Network (SONET) rings around cities and then tying them together by a fiber network is important, and MCI's key large customers also are MFS's.

No, the real jewel is UUNET, which runs over this fiber backbone and can be the major international player, the one who gains traffic and wholesales to local Internet service providers.

Next week, I'm addressing all the CEOs of the South American telephone companies, and what is it they want to hear about? You betcha: Internet-based services. They think this is a potentially profitable service, one that can attract an entire new cadre of users. They see voice over the Internet, especially internationally, as a way to lower their costs. Who's available? UUNET.

Bottom line: MCI was making slow progress internationally. Concert was finally working but not yet making money. WorldCom's combined MFS/UUNET strategy has already kicked in and will give the new company a leg up.