MCI returns to the trading floor

There will come a time when you believe everything is finished. That will be the beginning.Louis L’Amour

Dear Vorticians,

It was two years ago last May that the late John Sidgmore – then newly appointed CEO of WorldCom – sat next to me on the stage at VORTEX 2002 and bluntly promised that the service provider WOULD NOT go bankrupt.

Just two months after that vow, the vast weight of WorldCom’s accounting scandals and fiscal impropriety toppled the company, sending the former high-flier crashing into Chapter 11.

MCI – WorldCom’s new/old moniker – actually emerged from Chapter 11 a few months ago, under the steadying influence of CEO Michael Capellas, whom I first met running Compaq’s fledgling server business many years ago.

This week, MCI took another big step back from the land of the walking dead as its stock once again began trading publicly, ending Wednesday’s session at a little under $17 after launching at $19. (It’s interesting to note that one of the other poster children for corporate scandal, Enron, was this week given permission by a judge to emerge from Chapter 11 protection.)

The carrier will be listed on NASDAQ as MCIP, with the nifty ‘IP’ hook emphasizing its Internet Protocol heritage, according to the company.

There’s more heritage here than just IP. This week, Leucadia National, an investment company that has been known to buy up distressed assets – such as WilTel – said that it was seeking government approval to buy as much as half of MCI’s shares, a move that could spark other potential buyers into action. MCI stressed that it was not entertaining ongoing discussions about a sale to Leucadia, whose ultimate goal here hasn’t been made clear.

So what’s the heritage part? Leucadia reportedly is being advised on the deal by former AT&T executive and Qwest CEO Joe Nacchio, who left Qwest amid questions about that carrier’s financial dealings. Nacchio was a staple of the early Vortex conferences, blasting hidebound regulators and confidently touting the rosy prospects of Qwest, which Nacchio built through the marriage of an upstart carrier (Qwest) to one of the regional Bell holding companies (USWest). Seems like old times again, no?

Having MCI in play could kick off a ripple effect of change in the telecom industry, where muddled regulation, falling prices, the growth of cellular and the increasing inroads of cable companies are only some of the problems that traditional service providers face today. Keep your eye on this situation.

Speaking of the telecom industry, I’ve been meaning to run this letter about my column on the problems at the FCC for some time. Apologies for the delay to Vortician Bill Sarine, who wrote, “John, I think you are right on the mark. The FCC has responded in a random manner, which points out how new technologies have impacted the market. If we don’t bring some sanity into play, we will only have more confusion. The combination of more movement into the cellular market and the increased use of metro wireless networking we will only see more movement away from traditional telecom. I am seeing more people just saying forget the land lines and using the cell network. Without voice traffic, the profit profile shifts and the AT&T’s of this world cannot maintain the infrastructure. Keep up the work.”

Now, I am assuming Bill, that you meant “keep up the good work” but you did leave out “good.” How should I read that? Hmmm.

Anyway, you can all reach me at jgallant@vortex.net. Bye for now.