MCI WorldCom Goes To Five Cents A Minute (Breakfast News) August 9, 1999


Monday, August 9, 1999

"If your desk isn't cluttered, you probably aren't doing your job."
-- Harold Geneen

MCI WorldCom Goes To Five Cents A Minute

Telecommunications services company MCI WorldCom (Nasdaq: WCOM) lowered its long-distance rates today, cutting off-peak fees to as little as a nickel per minute.

Such a cut symbolizes something consumers stand to appreciate but which will likely reshape the way telecommunications companies operate: the commoditization of the industry.

The new offer, given the name "MCI 5 Cents Everyday," offers $0.05 per minute on residential state-to-state long-distance calls made between 7 p.m. and 7 a.m. and all day Saturday and Sunday, along with weekday daytime calling for 25 cents per minute, for a $1.95 monthly fee. MCI had already offered a "5 Cents Sundays" plan established about two years ago.

Look for MCI WorldCom to ramp up marketing rapidly, particularly in the form of television commercials featuring Michael Jordan and the Looney Tunes characters.

According to today's issue of The Wall Street Journal, while the nickel fee is not groundbreaking, the fact that it is available for so much of the week is. Two weeks ago, Sprint (NYSE: FON) introduced "Nickel Nights," which offers $0.05 per minute calling every night between 7 p.m. and midnight, for $5.95 a month. Other calls are a dime per minute.

And market share leader AT&T (NYSE: T) is still primarily in the dime-a-minute range, although it plans offer the same price all day. Its "One Rate" plan is at that price point, but it carries a $4.95 monthly fee. Qwest Communications (Nasdaq: QWST) further muddies the waters with deals offering full-time $0.05-per-minute calls for $14.95 each month, as well as $0.09 per minute for $4.95. Clearly, shoppers should be paying attention not just to the per-minute rate, but also to the fine print, before signing up.

Further price cutting among industry players seems likely.

AT&T, meanwhile, was the subject of a lengthy feature in this week's issue of Barron's in which writer Leslie Norton says Ma Bell "is still largely a drab old long-distance company," despite its efforts to hitch its wagon to the shining star of the Internet, and could be hurt by further price-cutting by its competitors.

News to Go

Chipmaker Advanced Micro Devices (NYSE: AMD) said computers sporting its new Athlon processor -- which will come in 650MHz, 600MHz, 550MHz and 500MHz iterations -- are expected to become available this month. Compaq (NYSE: CPQ) and IBM (NYSE: IBM) plan to put the Athlon in models aimed both at business and individual users.

Computer networking firm Cisco Systems (Nasdaq: CSCO) agreed to invest $1 billion in accounting and consulting firm KPMG to aid the company's expansion on the Internet, according to reports in yesterday's New York Times. Cisco will have a stake of less than 20% in KPMG. The accounting firm's Chairman and CEO Stephen Butler told the newspaper the market for business services on the Internet is growing by more than 40% yearly.

Digital signal processing (DSP) chipmaker Texas Instruments (NYSE: TXN) said it will revise 1998 and Q1 1999 financial results, which will raise Q1 1999 EPS to $0.60 from $0.58, including special charges, but won't change the charge-free figures. Q2 1999 EPS will increase by a penny to $0.92 due mostly to rounding.

More Foolishness

Click here for a closer look at July retail same-store sales numbers... Check out a StockTalk interview with the CEO of Adobe Systems (Nasdaq: ADBE)... Learn more about IPOs in this Foolish feature.

By Yi-Hsin Chang (TMF Puck)

Remember to start each business day with Breakfast With the Fool at 9 a.m. Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.