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7/26/2002
03:44 PM
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WorldCom Scrambles To Keep Customers And Revenue

Carrier hopes to re-emerge intact after filing for Chapter 11 protection

Now that WorldCom has filed for bankruptcy protection, president and CEO John Sidgmore says he's confident the company can restructure and emerge intact within a year.

But WorldCom's ability to retain customers and revenue during that period will be crucial to its success, and analysts question whether the company can ride out the effects of its $3.8 billion financial scandal and continue to meet service obligations with diminished resources.

Struggling under $30 billion in debt and having missed a $74 million interest payment, WorldCom filed Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of New York on July 21, listing $107 billion in assets and $65 billion in liabilities. "I regret that we're in the position we're in today, but frankly bankruptcy became the only way to provide for our company's future," and was in the best interest of WorldCom, Sidgmore says.

Of all companies that file bankruptcy, 28% go out of business. "The rate of failure for the telecom industry's going to be even higher," says David Willis, VP of global networking strategies at Meta Group. "WorldCom's risk of failure post-Chapter 11 is still very high," given the distrust business customers have about WorldCom, the difficulty of turning a profit in the telecom industry, and skepticism among financial companies and investors, Willis says.

Having met with several of WorldCom's largest business customers, those that rank among the largest 500 companies in the world, Willis predicts each will transfer at least 10% of its traffic to other carriers

Even before the scandal broke, "we'd seen greater delays in how quickly WorldCom customer service reacted, and it took them longer to fix billing problems when we contacted them," says John Podrovitz, president and CEO of MSS Group Inc., a Castle Rock, Colo., business-process outsourcer that handles telecom bills for its clients, including processing $300 million to $400 million in bills a year from WorldCom. Customer service will become even more challenging for WorldCom after laying off 21% of its workers.

Former CFO Scott Sullivan, fired by WorldCom's board of directors, and former control-ler David Myers, who quit, face crim-inal indictments, possibly this week.

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