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WorldCom’s 100-Day Plan “On Track,” Says CEO

WorldCom Inc., the phone and Internet giant aiming to leave behind a corporate scandal that shocked the world, is midway through a 100-day plan geared to propel the Mississippi-based company out of bankruptcy.


“So far we are on track,” WorldCom Chairman and CEO Michael D. Capellas said today, during a speech in Washington D.C.


WorldCom, which has 22 million customers and more than 60,000 employees, is in Day 50 of a 100-day plan Capellas announced in January to turn the company around, the chief executive said, making Jan. 6 the kick-off date. However, Capellas announced the plan Jan. 14. A spokesman did not answer a question on the timing discrepancy.


WorldCom, whose former executives have been at the center of a scandal for their alleged involvement in a multibillion dollar fraud case, aims to emerge from the largest bankruptcy in U.S. history later this year. Capellas has implemented fresh faces on the board of directors and at high executive levels.


“The entire board that was responsible for the past is no longer with us,” he said. “Those who are a part of the past will remain in the past.”


Asked about industry concerns that WorldCom would emerge from bankruptcy “leaner and meaner,” Capellas said, “Absolutely, or you’ll be talking to the next CEO.”


The chief executive, who spoke during a meeting hosted by the National Association of Regulatory Utility Commissioners, responded to concerns that the company would slash prices once it emerges from bankruptcy. “There will be pricing discipline in the marketplace, because there has to be,” he said.


The plan includes the introduction of new products and services to the consumer and business markets, a greater emphasis on the small to medium-sized business market and cost-cutting measures. WorldCom aims to file a plan of reorganization April 15.


Capellas, who was recruited by WorldCom employees while still the president of Hewlett-Packard Co., commended his workforce, referring to their “incredible morale” and “intensity.” Capellas also said WorldCom would complete a cost-reduction program by the end of the month. The company has announced a planned reduction of 5,000 employees who are primarily involved in administrative and corporate functions.


Capellas also cautioned state regulators: “Don’t set policies today that block the future,” saying that the policy to be set forth “is not for today. It is what is going to happen in two or three years.”


While it was unclear whether the company was referring to any specific policies, WorldCom and its chief long distance rival AT&T Corp. won a key regulatory battle when the FCC preserved local phone regulations that allow the companies to lease the Bell networks to serve the mass market at rates state regulators set based on a forward looking cost model.


“Obviously we are pleased with the result,” Capellas said of the decision, but the chief executive expressed disappointment over broadband policies that the FCC also issued last week as part of its Triennial Review. The FCC lifted many restrictions on the Bells to share their broadband networks with rivals at regulated rates, including line-sharing requirements that give Internet providers access to the high-frequency portion of the incumbent copper loop.


“We are not particularly pleased with the way the broadband came out,” Capellas said, though he vowed that WorldCom would not react to the decision with “blatant rhetoric.”


WorldCom’s MCI and AT&T have sought to counter the recent long-distance offensive of the RBOCs by invading their dominant territory: The local phone market for consumers. As of this month, MCI has reported approximately 1.5 million customers in 42 states and Washington D.C. on its bundled local and long-distance plan, dubbed “The Neighborhood.” The Neighborhood “continues to go reasonably well,” Capellas said.


Capellas said never in his 27 years of professional experience has he seen “innovation decelerate as fast as it has in the [last] two years. It scares the devil out of me.”





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