• United States

The long road for MCI

Apr 23, 20032 mins
Internet Service ProvidersNetworking

* What are MCI's chances for a full recovery?

Although MCI (WorldCom up until last week) says its capital expenditures will total $1.2 billion this year, analysts say that’s not enough for a company that’s bringing in $24.5 billion in revenue.

To date customers have not been complaining about the reliability or performance of MCI’s networks (see story link below), but some observers question if reliability and performance will begin to suffer in the near term if MCI does not invest in its networks to the level that they should or to the level that its competitors’ networks are.

One way that will allow MCI to spend more on its network without increasing its CapEx spending will be to bring in cash from the sale of some of its assets.

CEO Michael Capellas says that MCI’s SkyTel paging division is “actively” being shopped around. The carrier’s disclosure statement also says that its Multichannel Multipoint Distribution Service (MMDS) business is also “for sale.” This is the carrier’s fixed wireless network and service that spans 13 cities.

Capellas also said that it is looking to eliminate MCI’s financial obligations to Embratel, a Latin American service provider.

One analyst also pointed out that there hasn’t bee much talk from the carrier or its executives about its assets in Asia. This seems to be raising some eyebrows, causing some to speculate that MCI is somehow de-emphasizing this business, which could also be “for sale.”

In addition providing additional capital to keep its backbone competitive, MCI still has a big hole in its product line – wireless.

Capellas clearly stated that there were enough wireless service providers out there and that MCI would be interested in partnering with another carrier rather than build or buy its own wireless business.

He says some talks have been underway, but there are no deals yet. It will be interesting to see how MCI will be able to bring wireless into its product portfolio, especially for its business customers, without adding new expenses.

Although MCI says that it will likely emerge from bankruptcy in the third quarter, its fair to say it will still have a long road to travel before it may see a full recovery.