• by John Gaffney , July 22, 2002

If you’re in the advertising business, WorldCom’s chapter 11 bankruptcy filing yesterday has to set you wondering about the telecommunications sector and its overall health. This is after all, a category that spent $234 million in ads for April 2002 alone, according to CMR, and contains some of the world’s biggest companies.

According to the most recent Fortune 500 listings, the telecom sector accounted for $339.7 billion in revenues in 2001 and only kept $4.8 billion in profits. WorldCom isn’t even the biggest player. Verizon, AT&T and SBC are ahead of it and Sprint follows at number five.

According to Forrester research “WorldCom will be forced into bankruptcy first but will then sell out to either SBC or Verizon.” This would leave WorldCom on more solid footing, but the telecom sector is still depending on a business model that favors subscriber and revenue growth above all, even profits. That hunger for subscribers could lead its advertising spend to remain stable as the Verizons, Sprints and SBC’s try to grab market share.

According to The Yankee Group, WorldCom may survive as the current crisis intact. “WorldCom needs to take full responsibility for its current condition. Blame should be assigned swiftly among the executives and board members as appropriate, and those responsible should be removed. This is truly a self-inflicted wound. Experienced telecom executives and governors with reputations for integrity must be installed to restore the confidence of customers and employees.

The new WorldCom leadership must maintain a laser focus on operations -- no deal-makers need apply,” its recent WorldCom report states. “Unlike other struggling telecommunications companies, WorldCom has assets, customers, and a revenue stream, and will not go gentle into that good night.