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Pending Sales Orders Nixed Following WorldCom’s Woes

Independent sales organizations representing WorldCom Inc. (www.worldcom.com) have had a majority of pending contracts canceled two days after the telephone and Internet giant disclosed inflating earnings by $3.8 billion.


"The immediate reaction, we had 60 percent of WorldCom orders in process canceled as of today," the president of a master agency said Thursday. "The reaction is get me out of here fast.


"I think existing WorldCom customers are rapidly looking for alternatives and certainly there are contractual issues," the agent said.


Agencies interviewed Thursday and Friday said their business customers using WorldCom had not asked to switch carriers. Jay Lewis, vice president of Minnesota-based agency VisionCom Inc. (www.callvci.com), said not a single customer has decided to leave WorldCom, although he conceded, “they are calling and concerned.” Furthermore, nearly all pending orders have been put on hold, Lewis said.


“People are delaying decisions now and I can’t blame people for that,” Lewis added.


Phone calls made to WorldCom seeking comment on its agent program were unreturned.


In what could shape up to be one of the largest fraud cases in U.S. history, Congress, the Securities and Exchange Commission (www.sec.gov) and the Justice Department (www.usdoj.gov) have vowed to launch separate probes into WorldCom’s disclosures Tuesday night that the company inflated earnings by $3.8 billion during the past five quarters.


In a letter to the White House Thursday, WorldCom CEO John Sidgmore told President Bush, “Yesterday you rightly expressed outrage and concern about past accounting irregularities at WorldCom. I want you to know that we, the current management team, are equally surprised and outraged.”


The disclosures nearly have eviscerated WorldCom’s stock price, hurt its chances of reaching an agreement with its lenders to secure credit lines and unnerved corporate America. Sales representatives said they are worried about their future commissions if WorldCom files for Chapter 11 bankruptcy protection, an outcome financial analysts have viewed plausible.


"I have got nervous customers,” said an agent manager who noted business customers canceled separate T1 orders Wednesday in California and Florida. “I have got nervous subagents . Who wants to sign up a multiyear contract with a carrier who looks like they defrauded the whole country out of $4 billion."


Executives representing other master agencies, including Scottsdale, Ariz.-based US Telebrokers Inc. (www.planet1comm.com) and Petaluma, Calif.-based Intelisys Inc. (www.intelisyscorp.com) conceded no one has any idea what will become of WorldCom — excpet that it is virtually unfathomable to believe the No. 2 U.S. long-distance carrier and world’s largest Internet backbone provider would shut down operations in a worst-case scenario.


"They are so deeply imbedded as a broadband provider in the retail, wholesale and government space that it is practically unrealistic to think they could disappear as an entity," said PlanetOne president and CEO Ted Schuman.


Saddled with $32 billion in debt, the Clinton, Miss.-based carrier recently announced a sweeping restructuring plan that includes negotiations to sell noncore assets, including its wireless resale unit, raise a $5 billion bank facility and reduce its headcount by 17,000 employees. The layoffs began today.


Schuman said a reliable senior level manager at WorldCom told him that the alternative channel unit is profitable and that he expected the layoffs to have "little to no impact" on that part of the business. WorldCom executives expect the alternate channel program to "remain 100 percent in tact," Schuman said, citing the manager.


Clearly, WorldCom’s woes already have taken a toll on agents. "Our subs we have talked to in the past day, I mean everybody is pretty much ceasing any WorldCom activity," said the agent who had 60 percent of pending WorldCom orders canceled by Thursday. "The marketplace isn’t just going to tolerate that," he said referring to the fraud allegations.


The president of another master agency said a Fortune 500 company with whom he is bidding for portions of its communications needs revealed the organization had decided not to renew its contract with WorldCom due to "uncertain financial factors." AT&T Corp. (www.att.com) is getting the business.


The master agency did not broker the WorldCom agreement with the Fortune 500 organization, but the independent sales group does book business on behalf of the carrier. Sales representatives negotiating contracts on behalf of WorldCom "obviously are concerned about commissions going forward" and losing customers, the master agent said.


Telecommunications providers have moved swiftly in recent months to exploit the financial woes of their peers, aiming to garner the wholesale and retail accounts of ailing carriers such as WorldCom. MegaPath Networks Inc. (www.megapath.net) disclosed Thursday it would expand its Broadband Rescue program "to help businesses and telecommuters facing the disruption of broadband connectivity by the shutdown, or pending failure, of their current provider."


Rick Dellar, co-owner of master agency Intelisys, called on sales organizations to act responsibly during WorldCom’s crisis and refrain from feeding customers erroneous newsbytes in order to hustle a quick dollar, a tactic the 10-year veteran said he has witnessed.


"It’s an environment of fear right now. The fact is no one is going to shut off WorldCom’s telecom circuits," Dellar said. "Being in the agent community I think it is real imprudent for personal gain to try to scare people into making a change."


Lewis, of VisionCom, said a customer signed a two-year contract this week with WorldCom for IP virtual private network service in five offices around the country, selecting the beleaguered telecommunications company over another giant inter-exchange carrier. The business agreed to do business with WorldCom in part as a “rub against the media” for what the company perceives as negative and unfair publicity surrounding WorldCom, Lewis said.


Dellar said salespeople should serve as a guide to businesses — educating them about the facts — and cultivate a relationship that will prove fruitful when the opportunities to earn a commission do arise.


Still, nobody is denying the allegations against WorldCom — and its financial predicament — could lead to grave ramifications. Said one agent: “People don’t just get fired. People go to jail for stuff like this.”






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