Telecoms Jockey For Position After WorldCom Filing

As telecom giant WorldCom struggles for survival, its long-distance carrier MCI and MCI’s rivals are jockeying for a stronger footing in an already cut-throat market.

AT&T and Sprint have run ads or tweaked existing campaigns that highlight their stability, while MCI is trying to tell customers that it’s doing fine. And all three telecoms are trying to fend off competition from Baby Bells and other companies entering the long-distance market.

AT&T Corp. ran full-page ads in The Wall Street Journal, USA Today and other big English- and Spanish-language newspapers July 1 and July 23. Headlined “Yesterday. Today. Tomorrow,” the ads trumpet AT&T’s longevity.

“You can count on us,” the ad read. “And since communication is everything, we’d like to take this opportunity to let you know there’s never been a better time to choose AT&T.”

The ads don’t specifically mention MCI, although the message is pretty clear. AT&T is the market leader.

“We wanted to communicate directly to AT&T customers our strength and longevity,” AT&T spokesman Gary Morgenstern said.

He said AT&T is also promoting its AT&T Unlimited service with an extensive TV campaign that has been running since February. He said in the long-distance business, it’s a constant effort to gain market share.

“You go after your competitors every day,” he said. “That doesn’t mean we won’t step up efforts” in the wake of WorldCom’s troubles.

No. 3 Sprint reportedly is also trying to highlight its strength and stability in its advertising. Sprint spokesmen couldn’t be reached for comment.

MCI is trying to convince its 20 million customers that its corporate parent’s troubles don’t have much bearing on its long-distance business. MCI continues its mostly TV-oriented Neighborhoods campaign, which spokeswoman Audrey Waters said has been “extremely successful,” signing more than 800,000 customers.

Waters said for MCI and its customers, its corporate parents’ troubles are a beginning not an ending.

“We’re a very strong company, a very determined company,” she said. “MCI has such a strong and valued brand recognition and we’re very proud of that.” Waters said MCI’s ads were building upon that. She anticipated no changes to ad spending related to WorldCom’s recent bankruptcy filing.

It’s logical to assume that AT&T, Sprint and other competitors would want to take advantage of WorldCom’s struggles to cherry pick MCI’s customers, said Rob Frieden, professor of telecommunications at Pennsylvania State University.

“They’re obviously capitalizing on this, as you would expect them to,” Frieden said. “There’s a gold-rush sense that the second-largest carrier is vulnerable.”

MCI has to fend off those challenges, said Ken Bernhardt, a professor of marketing at Georgia State University.

“They need to reassure their customers that they don’t need to look around for new long-distance service,” Bernhardt said. “Retention is critical at this point.”

He said many consumers don’t understand that the Chapter 11 filing is designed to keep WorldCom in business, not ease its way out.

“It’s a complex message to get across,” Bernhardt said.

Bernhardt said MCI’s competitors are on target with their messages of stability.

“It doesn’t need to be overt,” he said. “They should say, ‘We’re here and we’re going to be here.’ And they can do that indirectly.’”

He said MCI’s strategy has been to differentiate themselves through price and, later, innovative marketing programs. He said it’s gained traction through its Neighborhood program.

But the future looks even more competitive. The cellular industry is challenging long-distance carriers. And Baby Bells like Verizon, SBC and Bell South are entering the long-distance market, riding the strength of a fairly strong customer base and brand loyalty.

Marketing and advertising costs are already quite high for telecoms. “It takes 20, 30, 50 dollars or more, sometimes hundreds of dollars, to acquire a customer,” Frieden said.

Bernhardt predicted: “It’s not going to get any easier for MCI WorldCom.”

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