PARTNER CHANNEL: WorldCom Sends Mixed Signals Regarding Agents

Posted: 07/2002

WorldCom Sends Mixed Signals
Regarding Agents

By Tara Seals

LIGHTSABER, WorldCom Inc. COO Ronald Beaumont shook up the channel galaxy in
May. Beaumont said during a teleconference with analysts and the press that
WorldCom’s agent program has been somewhat unsuccessful, and the carrier would
scale back its investments in the area. At the same time, the company rolled out
new product sets specifically for agents. And so, as Yoda would say, "Hard
to see, the future is."

Signals from WorldCom indicate agent
programs remain a possible target for streamlining. Claire Hassett, WorldCom
spokeswoman, says the company is taking a "top-to-bottom review of its
businesses" and is "looking at everything." She notes it’s
premature to talk about cutting additional distribution channels or product
sets, but WorldCom will embark on a significant reorganization.

Meanwhile, WorldCom reports first
quarter consumer revenue declined by 12 percent from the same period a year ago,
while wholesale revenue declined by 16 percent. At the same time, alternate
channels/small business revenue declined by 24 percent, nearly double that of
the other two divisions.

The confusion began in May when
Beaumont told press and analysts the carrier would put its agent programs into a
holding pattern and move toward a direct sales model. He said the company’s
direct sales force needed to be beefed up, because it had suffered from recent
cutbacks and layoffs. Beaumont characterized agent involvement in WorldCom
business markets as "sporadic," adding, "[I] don’t anticipate
you’ll see us increasing that."

He said WorldCom would terminate its
agency programs in the troubled wireless division. About a week later, it
announced plans to sell its wireless resale unit.

This development and ensuing
industry press reports that the carrier was moving away from agents sparked a
series of rebuttals from WorldCom. Insiders insist the COO’s comments regarded
only the wireless business.

"He was only referring to the
wireless division," wrote Brent Lacho, director of sales at WorldCom, in an
e-mail he sent to an agent partner, who shared it with PHONE+. "For some
reason, the comments were interpreted as being applicable for all MCI and
WorldCom agency business."

In an agent newsletter, WorldCom
alternate channel vice president George Hampton wrote, "Our agent and
distributor program is an important part of our overall distribution strategy.
We are thriving in this area, along with many other alternate distribution and
partner programs."

Hampton cited two new product
rollouts as evidence of channel commitment. "Business Success" is a
bundle of long-distance, toll-free and calling card services. Also, the company
has released a data product set developed exclusively for agents and
distributors. It includes dedicated Internet access, private line, frame and ATM
plus integrated access on a DS1 that can combine voice, toll-free, private line,
frame relay and up to 1.5mbps of Internet services.

Still, Hassett says restructuring
decisions have yet to be made. Channel programs at MCI and WorldCom (with
roughly 1,500 agents) are not up for reorganization at the moment, she adds.

Agents’ views on the matter are
divided. "We were not surprised to see official announcements coming from
senior management that they were changing their strategy and moving away from
adding resources to the agent channel," says Rick Dellar, co-founder of
master agency Intelisys Inc. "Although the WorldCom employees we have
consistently dealt with in terms of support out here on the West Coast have
always seemed to have good intentions, we have largely been unsuccessful in
getting any traction with them as a supplier.

"I believe part of that has
something to do with Intelisys, but the reality is their channel strategy and
execution has been inconsistent and fragmented over the years," he adds.
"We have never felt they have had a solid commitment to the agent channel
and I think this is evidenced by both ‘flip-flop’ strategy changes in the past,
as well as the recent announcements."

Greg Praske, president and CEO of
Association Resource Group (ARG), however, says his company has experienced good
support from the carrier. "Before WorldCom financial issues hit a critical
point, they were very aggressive in seeking a stronger agent relationship. We
haven’t seen anything that has diminished since then. In fact, they’ve been even
more aggressive in trying to earn more of our business. They have even referred
business and partnership opportunities to us."

The carrier’s financial crisis,
includes a $25 billion debt, investigation by federal securities regulators and
a loss of more than 80 percent of its value. Moody’s and Standard & Poor
reduced WorldCom’s credit rating to junk status during the last week of May. At
press time, WorldCom reportedly was drawing up a plan to eliminate 16,000 jobs,
or 20 percent of its workforce worldwide.

John Sidgmore, who replaced Bernie
Ebbers as CEO, says the company’s outlook is bright despite the storm clouds.
"Our perceived financial issues are not reality," said Sidgmore during
a May conference call. "WorldCom’s 25 million customers are hanging tough
despite the news reports, and liquidity is not an issue."

"Our stock price and credit
rating have no impact on our ability to serve customers or our ability to
conduct daily business operations," added Scott Sullivan, executive vice
president and CFO. "And our stock price has no impact on bonds or
availability of bank facilities in terms of liquidity."


Resource Group



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