Why You Can Trust CNET MCI WorldCom growth to outstrip AT&T
For a few heady moments on Wall Street, the market value of MCI WorldCom passes up that of the godfather of telephone companies, AT&T.
Although AT&T pulled back into the lead on the strength of today's $5 billion deal with IBM, MCI WorldCom's temporary place at the top underscores a feeling that the company may be growing at a greater pace than its venerable rival, according to analysts.
A series of converging factors have made MCI WorldCom an "institutional favorite," as one investment house said. The merger between MCI and WorldCom, capping a string of 68 acquisitions, gives the company an end-to-end system of local, long distance, and data networks that stretches across the globe.
"MCI is more of a world company with its own seamless integrated network," said Ted Levy, a telecommunications analyst with McDonald Investments. Levy said that cost savings and economies of scale stemming from the MCI WorldCom merger also help put the company on a path towards a steeper short-term growth rate than its rival.
AT&T has also made strides into the local services market, striking a $11 billion merger agreement with local service company Teleport Communications last summer, followed by the still-pending $48 billion merger with cable company Tele-Communications Incorporated. Its international strategy has been boosted by a partnership with British Telecommunications.
These ventures will be of considerable value to AT&T, but still trail MCI WorldCom's local and overseas proprietary networks, Levy said. "They don't own an international footprint. It's not the same as owning your own network."
Analysts said that MCI WorldCom also has benefited from the Internet fever that has periodically swept through the markets, driving stocks such as Amazon.com and eBay to unprecedented heights.
MCI WorldCom has made a string of Internet and data services announcements in recent months, capping the series last month with news that it will roll out high-bandwidth digital subscriber line (DSL) service across the nation by the end of the year, with 600 points of access planned by next March.
AT&T has pushed its own WorldNet arm by striking deals with Internet portal companies and aggressively marketing to its own long distance subscribers.
Today's deal with IBM, in which AT&T will take over Big Blue's Global Network business, will give the telco about 35,000 new corporate Internet customers and a global network with points of presence in 59 countries.
That deal could help level the Internet playing field between AT&T and MCI WorldCom, analysts said.