The completion of Michael Capellas’ second 100 days as head of MCI was marked by the arrival of a fraud accusation from AT&T and news that the feds might bar MCI from seeking government agency business.
Why the AT&T lawsuit is a red herring
Johna Till Johnson explains.
That’s a far cry from the carefully orchestrated rah-rah fest thrown on the company lawn and Webcast to the world in April to recount the accomplishments of Capellas’ first 100 days, which were indeed action packed – new management sworn in, strategic plan completed, company rebranded and reorganization plan approved.
The latest round of bad news started with the accusation by AT&T, SBC and Verizon that MCI fraudulently routed calls through Canada to avoid paying access fees to other carriers. MCI countered that all carriers practice least-cost routing and the claims against it “have been made solely for competitive gain.”
Some observers agree. Investment research firm Precursor Group characterized the allegation as a “transparent industry assassination attempt” meant to derail MCI’s emergence from bankruptcy. It won’t work, Precursor argues. The dollar amount is too low and the regulatory area in question too complex for this to cause trouble.
But while that mess was still unfolding, MCI was hit with news that the government is considering prohibiting it from bidding on new federal contracts. MCI has vowed to fight for the right to be considered for future work.
How does all of this news sit with large would-be customers? I asked two multi-billion dollar outfits if the blemishes would influence their decisions, and here’s what they had to say:
“I would consider them. There needs to be competition in the market, and MCI was a positive market force in the past, only running into trouble in the last five years or so. They will emerge from Chapter 11 in decent shape.”
But the other wasn’t so kind: “We included them in a RFP with a lot of mixed feelings about the Chapter 11 process. We thought they would be aggressive on pricing and we could at least use them to balance cost. But they’ve been one of the most expensive so we eliminated them. The all-smiling sales crew has not lost a bit of its arrogance. I’m amazed at how few have changed their attitude.”
Capellas has achieved a lot in a short time, but the latest news and customer views like the latter show just how much further he has to go.
Nonetheless, observers say MCI will likely emerge from bankruptcy on schedule (the next milestone is a confirmation hearing Sept. 8), even in the face of these latest developments.
