• United States

WorldCom users want say in process

Oct 14, 20024 mins

WorldCom’s largest customers are so concerned that their interests in the carrier’s ongoing bankruptcy reorganization will take a back seat to those of cash-hungry creditors that a group of them is asking a New York court to intervene.

NEW YORK – WorldCom’s largest customers are so concerned that their interests in the carrier’s ongoing bankruptcy reorganization will take a back seat to those of creditors that a group of them is asking a New York court to intervene.

Seventeen WorldCom customers, including Bear Stearns, Capital One, Georgia-Pacific and Procter & Gamble, have asked a bankruptcy court to overturn an earlier decision by the U.S. trustee supervising WorldCom’s reorganization and order the creation of a formal customer committee. If that plea is successful, the committee expects it will focus on these areas:

  • Contract compliance, service levels and credits.
  • Infrastructure maintenance, account support, product development and support.
  • Assuring that the reorganization “preserves the ability of enterprise users to obtain services needed from one entity.”

The businesses behind this customer committee movement spend $300 million annually with WorldCom on communication services, according to documents filed with the U.S. Bankruptcy Court in the Southern District of New York.

Several companies, including Gateway and Target, that are behind the motion declined comment.

A WorldCom customer not involved in the effort says it is indicative of broader customer concerns. Ulrich Seif, CIO at National Semiconductor in Santa Clara, says the manufacturing firm has been less than pleased with WorldCom’s response to its recent service issues.

“WorldCom has not acknowledged an urgency in the whole situation, rather stating that business is better than ever and that they intend to be out of bankruptcy in spring 2003 and debt free – no supporting explanation though,” he says. “This position . . . has led to little flexibility on their part concerning our issues. So [the customer request] doesn’t surprise us.”

Seif says National, a WorldCom customer for the past three years, is looking for an alternate carrier to meet its remote access needs. “We need to reduce the exposure of our enterprise to the uncertainties around WorldCom,” he says.

“It’s a poor assumption to make that WorldCom . . . is going to emerge from bankruptcy with everything it has today debt-free and ready to go,” says David Rohde, senior analyst at TechCaliber.

The driving force behind the customers’ request is the need to preserve the network and infrastructure that handles their business voice and data traffic, according to the documents.

Customers are concerned that if they have to switch carriers because WorldCom’s network infrastructure is not maintained or is sold to a party that is not interested in their ongoing patronage that their businesses would suffer.

The petition says “the loss or weakness of WorldCom would have – indeed is already having – substantial, adverse effects on competition in the market to provide [enterprise voice and data] services.”

Customers say if they are forced to move to AT&T or Sprint under duress they will not be offered the best pricing. And if they are forced to move to another carrier, their needs might not be met because the exact services they buy from WorldCom might not be supported elsewhere, Rohde says.

“The situation can be stabilized with user input,” he says. “Customers don’t want to receive letters saying we’re migrating your service to a company you never heard of or [a regional Bell operating company].”

But the WorldCom customers might be angling for an unlikely solution.

“The appointment of a customer committee is not a typical event, but it’s not unprecedented either,” says Stephen Leach, a partner at Venable, Baetjer and Howard, a Vienna, Va., law firm. Leach, who is co-counsel for the group, helped file the motion with the bankruptcy court last week.

“The reality is it is always difficult to get a committee approved by the court other than the unsecured creditors committee, which is provided for by statute,” Leach says. “It’s hard to assess our chances.”

If the court approves the committee, it is up to the court-appointed trustee to select committee members. The committee could consist of the same users that petitioned the court or the trustee could pick other WorldCom customers.

The court has scheduled a hearing for Nov. 12.