Users Relieved by Merger Halt

FRAMINGHAM (06/30/2000) - Many corporate telecommunications customers were relieved this week when the European Commission and the U.S. Department of Justice took separate actions to halt the proposed merger of WorldCom Inc. and Sprint Corp.

John Fischer, an executive vice president at The CIT Group Inc. in Livingston, New Jersey, said his company's selection of WorldCom as its primary telecommunications provider four years ago was short-lived.

"During the first year [with WorldCom], we were very pleased," he said. Shortly thereafter, Fischer said, he noticed a slowdown in his company's domestic and international data traffic that went through WorldCom's frame-relay system.

"The bandwidth availability was there," said Fischer, "but it was overutilized [by too many customers]. Too much traffic was going into their frame-relay cloud, and that cloud was full of lightning bolts."

CIT Group is a financial services company that needs instant information, and the network slowdown "killed us," said Fischer.

Fischer said CIT Group moved back to AT&T Corp. to handle the lion's share of its telecommunications requirements just 19 months after contracting with WorldCom. AT&T now handles 90% of his company's business, while WorldCom has 10%, he said.

While Fischer said he would like to see WorldCom "grow organically instead of by acquisition," Tim Talbot, vice president of technology services at PHH Vehicle Management Services LLC in Hunt Valley, Maryland, said he's more amenable to the merger.

"I don't see how [the Sprint/WorldCom merger] differs with what Bell Atlantic has done with Verizon. It's my opinion that clients and customers would benefit [from more services]," he added.

Verizon Communications in Bedminster, New Jersey, is the telecommunications firm slated to be formed by the merger of GTE Corp. in Irving, Texas, and Bell Atlantic Corp. in New York. The merger was approved by the Federal Communications Commission June 16.

Still, Talbot said he does have one reservation about the proposed deal. "My only concern," he said, "is that you're narrowing the players in the market.

Look at the price of gas. There's something funny about that. I wouldn't want the same thing to happen here [in telecommunications]."

Less Choice

David Willis, an analyst at Meta Group Inc. in Stamford, Connecticut, said he agrees that paring down the number of big telecommunications providers could limit customer choice. "The only alternative that customers were going to have [other than WorldCom and AT&T] for switched voice, ATM and frame relay was going to be Qwest." Denver-based Qwest Communications International Inc.'s delivery capabilities, he said, "aren't there."

Fischer is adamant about the need for reliability and service from telecommunications vendors. "You don't have those, you're out of business," he said.

Duane Williamson, director of telecommunications at Budget Rent-A-Car Corp. in Lisle, Illinois, said he believes consistent service levels are important, too.

He stayed with AT&T because of the service it offered after a review that included WorldCom and Sprint. He said WorldCom "is about to reach a point of saturation, a point where they are going to be out of control."

A spokesman for Sprint said neither Sprint nor WorldCom would comment on customer reactions to the merger.

Approval of the merger could have forced one aerospace company to change providers, according to George Sullivan, a senior network architect at a company whose name he didn't want disclosed.

His company contracts with Sprint for most voice communications and with WorldCom for data traffic. If the two companies merged, said Sullivan, "I believe there would be no incentive to be sure their customers would be getting the best possible prices."

But Carl Garland, an analyst at Current Analysis Inc. in Sterling, Virginia, said he believes the merger is far from dead - with one caveat. "Sprint is starting to pick up the pace with some new products," such as the rollout of fixed broadband wireless services in Phoenix and Tucson, Arizona. "This suggests to me that they may be trying to implement a contingency plan," he said.

Should Sprint and WorldCom not merge, some analysts say Sprint could be a takeover target for a European company, such as Germany's Deutsche Telekom AG.

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More about AT&TCIT Group (Australia)Communications InternationalDepartment of JusticeDeutsche TelekomEuropean CommissionFederal Communications CommissionGTELivingstonMeta GroupPHH Vehicle Management ServicesPhoenixQwestQwest CommunicationsSprintSprintVerizonWorldCom

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