MCI looks to secure its future
The phone company emerges from bankruptcy, and CEO Michael Capellas says it's making a "major move" into selling security services.
"It's been like a marathon with hurdles," Capellas said of the just-concluded bankruptcy during a conference call.
Since 2002, MCI has been mired in one of the most notorious corporate fraud scandals in U.S. history. In July of that year, it filed what has become the largest ever corporate bankruptcy case in the United States. Two years later, the accounting scandals that led to the company's demise continue to make news, with former CEO Bernard Ebbers recently indicted on federal fraud charges.
MCI has emerged from bankruptcy with about the same number of customers as when it first filed but with $10 billion less in annual revenue. Capellas blamed the revenue decline on price cuts to keep pace with AT&T, Verizon Communications, BellSouth and other competitors, plus the growing number of people dropping traditional home phones in favor of cellular or Net phones. Also, a number of MCI's midtier business customers fled to competitors during the bankruptcy, he said.
Capellas hopes to win those customers back and expand overseas, using a mix of MCI's own products and those from new partnerships to come. The company will also rely on recently announced service-level agreement plans that provide protection from denial-of-service attacks and Net phone access via its virtual private network service.
"Security is the No. 1 concern of virtually every CIO," he said.
The company will also promote new managed security services, including remote access, firewall, and intrusion detection and prevention services. It plans to make several security service announcements next week, Wayne Huyard, president of U.S. sales and service for MCI, said in a telephone interview.
Like its rivals, MCI will also compete in the VoIP (voice over Internet Protocol) market. But unlike AT&T, which recently started offering consumer VoIP, MCI will focus its Internet voice services on the business market, Huyard said.
"In order to build a sustainable VoIP business, you really need to own your own broadband facilities," Huyard said. "In places where we own access to consumers, we will offer VoIP. But our main focus is on the business market."
MCI owns access equipment in 114 metropolitan markets. In other markets, it leases transport and switching gear from local Baby Bells. But as regulated pricing on the leasing of this equipment ends, MCI is looking to expand its footprint in metro areas by building its own infrastructure, according to Huyard.
"We have enjoyed a growing consumer local business," he said. "And we will continue to pursue the converged voice, video and data service market. But we will increasingly do it on our own infrastructure."
Despite MCI's attempts to get back on track, Patrick Comack, an equities analyst at Guzman & Co., said the cards are stacked against it. "MCI is under the gun, with so many negative forces against it," Comack said.
Capellas acknowledged the challenges but said the bankruptcy proceedings did nothing to impair the company's core assets, including one of the world's largest Internet Protocol networks that has been used to deliver phone service and broadband in about 140 countries.