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THE WORLDCOM BANKRUPTCY

Sprint, AT&T Vie for WorldCom Customers

Telecom: Long-distance giant's rivals report an increase in calls to customer-service lines and visits to Web sites as anxious subscribers seek stability.

July 23, 2002|ALEX PHAM | TIMES STAFF WRITER

WorldCom Inc.'s bad fortunes could be good for AT&T Corp. and Sprint Corp.

The nation's No. 1 and No. 3 largest long-distance carriers, respectively, are starting to scoop up WorldCom customers who are desperately seeking backup phone service or fleeing WorldCom altogether, industry experts said Monday.

"Both AT&T and Sprint are already starting to benefit" from WorldCom's demise, said Don Carros, a telecommunications consultant with Meta Group Inc. "The way it's breaking down is that 60% of those leaving WorldCom are going to AT&T and 35% are going to Sprint." The remaining 5% go to so-called Baby Bells such as SBC Communications Inc. and Verizon Communications Inc.

AT&T and Sprint declined to say how many new customers are WorldCom refugees, but both reported substantial upticks in calls to their customer-service lines and visits to their Web sites.

AT&T had a 40% share of the $100-billion U.S. long-distance market in 2001, WorldCom had 20% and Sprint had 8%, according to Gartner Dataquest.

For residential customers, defections are mitigated by the fact that many people don't realize MCI is the long-distance arm of WorldCom.

"When people look at their bills, they see MCI, not WorldCom," said David Barden, analyst with Banc of America Securities, which holds $333.7 million in WorldCom bonds. "In some respects, this has kept MCI one step removed from a lot of the negative press."

Business clients tend to be more savvy, but it's too early to tell how many will switch. That's because businesses often are locked into multiyear contracts for phone and Internet services. As a result, only about 3% of contracts are up for grabs in any given month, Carros said.

Meanwhile, Sprint and AT&T have been aggressively scouting for new customers and marketing their financial stability.

Sprint, for example, is running an advertising campaign emphasizing its 100 years in business. In pitches to potential clients, salespeople are prepped to talk about the company's finances in detail.

"There's been a tremendous increase in customer inquiries across the board for us," said Mark Bowser, senior vice president of sales for Sprint, which is based in Overland Park, Kan. "My personal call volume from customers is up four times from what it was six weeks ago. How much business that will generate remains to be determined."

Although Sprint's 2001 annual revenue of $17 billion is roughly one-third the sales of AT&T's $52.6 billion, the company has snagged customers by being flexible and fleet-footed, said Steve Koppman, senior analyst with Gartner Dataquest. "Sprint has a reputation of being more willing to go out of its way to please customers and being innovative as well as lower-cost," he said.

The WorldCom meltdown is proving to be a boon for AT&T, which is "being opportunistic in reaching out to customers," said AT&T spokeswoman Eileen Connolly.

Seeking to assure customers of its financial health, AT&T is touting its relatively low debt levels. The New York-based company paid off $22 billion in debt last year, Connolly said. As of March 31, AT&T had $34 billion in debt. The company, which is reporting its second-quarter results today, also expects to use the bulk of the money from the $27-billion sale of its cable business to Comcast Corp. to further lower its debt to between $14 billion and $16 billion, Connolly said.

"This couldn't come at a better time for AT&T," said David Willis, an analyst at Meta Group.

How many customers switch depends on how well WorldCom manages its business over the next few weeks. If layoffs lead to poor service, businesses will bolt, analysts said.

"Business customers want stability," said Jeffrey Kagan, a telecommunications consultant based in Marietta, Ga. "If WorldCom loses a customer, they'll lose them for good. No customer will come back, even after the fire is put out. Once they settle in with AT&T or Sprint, they're not going to want to leave."

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Times staff writers David Colker and Elizabeth Douglass contributed to this report.

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