CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

WorldCom becoming one-stop provider

WorldCom's buyout of CompuServe brings it a step closer to becoming a one-stop shop for telecommunications services, this time by connecting businesses via the Net.

WorldCom's buyout of CompuServe today for $1.2 billion brings it a step closer to becoming a one-stop shop for telecommunications services, this time by connecting businesses via the Net.

The complex deal also calls for The selling of CompuServe WorldCom to hand off CompuServe's consumer subscriber base to America Online in exchange for AOL's ANS Communications network. For WorldCom, the deal will expand its backbone to serve businesses over the Net, a lucrative market.

WorldCom's buyout of CompuServe is the latest example of how this decidedly nontraditional long-distance carrier is gaining ground on the industry's big three--AT&T, MCI, and Sprint--by moving quickly into new businesses under deregulation. The Jackson, Mississippi, company even has a sense of humor, unusual in the button-down world of telecos.

"WorldCom is the nation's fourth-largest telecommunications carrier (for now)," the company says on its Web page. Adds chief executive Barnard Ebbers in his annual letter to shareholders: "Our goal is to build a communications company that behaves very differently from the monopolies that have developed over the past 100 years."

Recent WorldCom corporate milestones

July: WorldCom subsidiary UUNet Technologies announces a global Internet fax service for businesses called UUFax.

February 1997: WorldCom's UUNet says it will invest $300 million to expand and upgrade its network.

December: Shareholders of WorldCom and MFS Communications complete their merger.

August: WorldCom announces plans to buy MFS for about $14 billion. MFS's crown jewels include major Internet access provider UUNet.

April 1996: The company announces a new 12-floor corporate headquarters in Jackson, Mississippi, to accommodate growth.

December 1995: WorldCom signs basketball superstar Michael Jordan for its marketing campaign.

WorldCom's buyout binge (it gobbled up MFS Communications and Internet service provider giant UUNet in one fell swoop last year) comes while its larger competitors are struggling. AT&T is looking for a new chief executive, and MCI was forced to renegotiate terms of its planned merger with British Telecom because of a slumping stock price.

WorldCom's revenue growth recently has been outpacing AT&T, MCI, and Sprint. The stock closed Friday at 31-1/2, nearing its 52-week high, and its stock-price appreciation has outpaced most telco giants.

In the world of long-distance telcos, WorldCom is an upstart. In 1983, Ebbers, a former high-school coach and hotelier, met with some business associates at a coffee shop in Hattiesburg, Mississippi, to work out details to start a long-distance phone company in the wake of the court-ordered breakup of AT&T. They came up with the name LDDS (short for long-distance discount service, a name suggested by a waitress). It began by reselling AT&T long-distance service to small and medium-size businesses.

Since then, LDDS has made dozens of acquisitions and changed its name to WorldCom. The company's biggest deal came in August 1996 when it bought MFS for $14 billion, which included UUNet. On the marketing side, WorldCom also has signed up basketball superstar Michael Jordan to launch a national advertising campaign.

Last year, the company posted revenue of $5.64 billion, up from $4.32 billion in 1995. It also was added to the Standard & Poor's 500 list.

"They grew through acquisitions during the past decade," said Jeffrey Kagan, an analyst at Kagan Telecom Associates in Atlanta. "It's been phenomenal."

The Internet has been a cornerstone to WorldCom's expansion strategy (local and long-distance phone service are the other two). Net-related revenue stood at $253 million last year, an increase of more than 250 percent over 1985. Last year, WorldCom announced a $300 million expansion of UUNet's Internet backbone. "Demand for bandwidth is creating real opportunity for WorldCom as we build out our network," Ebbers said.

Last week, WorldCom said it would buy NLnet, the Netherlands' largest ISP, and sources said a deal to buy a Swedish ISP is in the works.

Back to intro