Worldcomm Fall Essay

1426 words - 6 pages

WorldCom the Rise and Fall
WorldCom began in 1983 during the breakup of AT&T, which enabled competitors to start selling long distance telephone service to individuals and business customers. A group of investors from Hattiesburg, Mississippi decided to start a communications company called Long Distance Discount Services (LDDS). The company lead by Bill Fields leased a local Bell System Wide-Area Telecommunications Service (WATS) line and resold time on the line to businesses. The sophisticated long distance technology was designed to handle a high volume of calls. The lines were leased at a fixed rate so the idea was that the more customers a company could obtain the lower cost for ...view middle of the document...

The new streamlined LDDS was able to bring in new clients through many different methods. First, was a claim of a personalized customer service center that the larger long distance companies could not offer. Instead of telemarketing, use of a direct sales force made the first initial face to face solicitation, and then monthly and sometimes weekly office calls were made to ensure the customer was satisfied with service. Secondly, LDDS took advantage of the small business market instead of going after big ticket clients like other long distance carriers. The company was able to tailor service to each customers calling pattern, which allowed maximized routing efficiency and cut cost. The final stage of growth for LDDS was through acquisitions, by 1986 revenue rose to $8.6 million and a year later sales had grown to $18 million. The company was now in a position to leverage its order to buy many other smaller long distance companies which included the following: Telesphere Network, Inc. (1987); Com-Link 21, Inc. of Tennessee (1988); Telephone Management Corporation (1988); Inter-Comm Telephone, Inc. (1989); ClayDesta Communications of Texas (1989); Microtel, Inc. (1989); and Galesi Telecommunications of Florida (1989). By the end of 1989 the company’s annual earnings had risen to $4.5 million and from 1983 to 1991 LDDS had purchased about 24 smaller companies allowing the network to reach 27 states.
The company continued to make acquisitions throughout the 1990’s with one of the biggest coming in 1995 when they completed the acquisition of WilTel Network Services for $2.5 billion in cash from The Williams Companies. Williams had created an 11,000 mile fiber optic network that was one of only four national networks in the United States. LDDS was now a major competitor having one of the most sophisticated U.S. networks and looking to become a global leader in the telecommunications industry. They changed the company name to WorldCom INC., and WorldCom continued to take the telecom industry by storm following the 1996 Telecommunications act of 1996, which permitted local and long distance companies to enter each others markets. WorldCom capitalized on this by acquiring MFC for around $14 billion in stock. MFC was a leading provider of alternative local network access facilities, bypassing the Bell networks through digital fiber optic cable networks; it had built in and around more than 50 U.S. cities and several in Europe. Along with this deal came UUNET Technologies, Inc., the world's largest Internet and first service provider. The company’s revenues had now reached $4.49 billion by 1996 with a recorded net loss of $2.21 billion reflecting a $2.14 billion charge related to the acquisition of MFS.
WorldCom could now offer customers the value of combining long distance, local service and data communications. Investors on Wall Street are now taking an interest in the company driving up the price of stock, which in turn provided the...

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