Leaving Chapter 11 Behind, WorldCom Won't Overspend - InformationWeek

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Leaving Chapter 11 Behind, WorldCom Won't Overspend

As WorldCom emerges from bankruptcy, the telecommunications company plans to spend as little as 5% of projected revenue on new equipment and technology. That fact has raised some eyebrows.

"Their capital expenditures are well under half of what they should be for a telco in maintenance mode, not trying to expand," says David Willis, VP of infrastructure strategies at Meta Group. Willis says the company should spend about 12% on equipment during the next two years. "They're looking for growth and to consolidate systems," he says. "You can't achieve that with the levels they're planning on spending." WorldCom is saddled with multiple ATM and frame relay backbones and legacy equipment it will have to integrate.

In a statement last week, CEO Michael Capellas outlined the company's plan to exit Chapter 11 bankruptcy protection as early as October, predicting that WorldCom will emerge as "a leaner, stronger competitor."

Trying to shake the largest U.S. bankruptcy ever, as well as an accounting scandal involving about $11 billion in misstatements, WorldCom laid out its post-bankruptcy future and said it will take the name of its long-distance unit, MCI.

WorldCom, which filed for Chapter 11 protection in July with $41 billion in debt, says most creditors have agreed to the plan that slices its debt to between $3.5 billion and $4.5 billion.

WorldCom predicts $24.7 billion in revenue in 2003 and sees it topping $27 billion in 2005. The company hopes marketing and rebranding efforts that kicked off last week will help it connect with customers new and old. But that won't be easy. "Not everyone is going to be eager to go back to a disgraced and bankrupted company," Willis says.

The company last week also named Robert Blakely as CFO, a post he held at Tenneco Inc. and Lyondell Chemical Co. Most recently, he served as a Financial Accounting Standards Advisory Council member. WorldCom also says it will move its headquarters to Ashburn, Va., from Clinton, Miss.

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