I can remember the first time I saw former WorldCom/MCI CEO Bernie Ebbers, at a meeting to discuss one of the company's big mergers in the late 1990s. He was the cowboy, the maverick, riding into the Big Apple with shiny spurs and a white horse.
Of course, following the company's subsequent Enron-like accounting misstatements, Mr. Ebbers has fallen from grace, to put it mildly.
So, when news flashed across my screen today that newly rechristened MCI was emerging from bankruptcy, the first thing that my brain produced was "Not that company again!" WorldCom/MCI filed under Chapter 11 bankruptcy in July 2002 after misstating its accounting numbers by about $10 billion (give or take a billion). The company had to pay $750 million in fines for this indiscretion, but it's really tough to trust a company once it has misled everyone. I felt like Charlie Brown trying to decide whether to trust Lucy and kick that football.
The good news is that the supposed new and improved MCI will emerge from bankruptcy with a wholesome balance sheet and a new set of faces leading its company. The bad news, however, is that the telecommunications services industry is ultra-competitive and the firm may not have enough key assets to compete with industry leaders AT&T (NYSE: T), Verizon (NYSE: VZ), SBC Communications (NYSE: SBC), and Sprint (NYSE: FON).
The new MCI is expected to rely on its Internet operations and its solid position as the No. 2 long-distance carrier behind AT&T. I see tumbleweeds rolling through the long-distance market prospects, with any growth in this industry sector drying up years ago.
MCI does have a significant Internet backbone, but so do all of its competitors. Without a wireless presence, MCI is at a bundling disadvantage to such key wireless players as AT&T Wireless, Sprint PCS (NYSE: PCS), Verizon Wireless, and even Deutche Telekom's (NYSE: DT) T-Mobile. To be a real player in the modern-day telecommunications market, a company must have the full package of long-distance, local, Internet, and wireless services.
It might be wise to adopt a wait-and-see approach to MCI's post-bankruptcy operations. With plenty of attractive choices in the telecommunications sector, investors should think hard before deciding that MCI can compete effectively enough in today's environment to deserve their dollars.
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Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
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