We are lead to believe the final installment in this saga will see MCI acquired for $8.45Bn in cash and stock by Verizon the local North Eastern Baby Bell. Verizon was playing catch-up after the SBC/AT&T deal struck in January created the No. 1 U.S. long-distance phone company. Ironically SBC and Verizon do not own global networks and mostly catered to consumers, offering local calling, high-speed Internet access and wireless services. A quick examination of Verizon confirms that it is a very US-centric business with $71B annual revenues from two main business units, fixed line operations in 29 states and wireless serving 43.8M subscribers across the US. The only international revenue appears to come from directory services and ownership of minority stakes in some wireless operators. In total about 3% of revenues.
For customers who sat tight during the discovery of $11Bn worth of books cooking, and have been getting daily updates of the ensuing court room drama, this deal could represent stability or the beginning of yet more uncertainty...
Speculation surrounds the global parts of MCI, Europe and Asia-Pac. With shareholder value the priority, what will be the fate of MCI rest-of-world? Backchannel invites you to view accurate customer metrics on possibly the largest MCI op-co, the UK.
MCI has 23% of FTSE100 Dedicated Access business by customer numbers. MCI has been losing its early lead for some time and continued to slide over the last quarter, with Great Universal Stores (Experian) falling to NTL. Even though churn among the FTSE100 is low compared to the industry average, as the dominant player MCI has most to lose. The firm's performance is in contrast to other Tier-1 competitors who have consistently gained ground.
Dedicated Access Culmative Win/Loss
The top end of Dedicated Access is stable while Hosting & Collocation churns. The chart shows relatively little churn in the Dedicated Access market over the last few months. However the picture for MCI is less favorable for Hosting and Colocation, where the company had a far smaller base to begin with. MCI or its VARs account for only a few percent of FTSE hosting and are down over the quarter after losing Rexam to BT and Allied Domecq to AT&T. Over the preceeding 5 months, MCI's hosting business has lost 3x more accounts than it has won. Customers will vote with their feet when it comes to deciding if the merger makes them feel more or less secure in MCI as a supplier.
MCI Performance relative to Industry Average Time to Repair
MCI fixes outages 34% faster than the industry average. MCI is a very strong performer for reliability and time to repair. It easily exceeds the industry average time to repair for Hosting and Dedicated Access. MCI customers suffered fewer outages of shorter duration on average than many of their competitors. It will be interesting to track this reliability as MCI's new parent may look to cut operational costs.
Verizon are about to inherit a company with more FTSE100 Dedicated Access customers than BT, one of the largest market shares for hosting and colocation, and a network whose reliability has remained strong throughout recent corporate dramas. Will they cash-in the non-US operating companies and break up the family estate? Does their vision stretch beyond the US for the company that was once called "WorldCom"?
