New WorldCom Could Bring Back Old Problem

Communications Today, July 22, 2002

A WorldCom [WCOME] that emerges from a bankruptcy proceeding without its $30 billion debt load could start a price war and make life very difficult for its biggest competitors, analysts told Communications Today.

WorldCom, still reeling from the effects of its $3.85 billion accounting scandal, could declare bankruptcy in the next few days. This past week, WorldCom agreed to freeze certain assets in exchange for a group of banks halting their legal efforts to recover a $2.5 billion loan they made to the company.

"[WorldCom] would operate better and with more flexibility than their competitors [if they declare and successfully emerge from bankruptcy] because they wouldn't have any debt overhead," Bob Olson, a network services analyst with InfoTech, a research unit of Communications Today publisher PBI Media said. "Sprint [FON] and AT&T [T] will be afraid of them without this debt."