The wireless division of WorldCom Inc. aspires to be present in all major U.S. markets, indicating that the nation’s fourth largest long-distance company seeks to be the country’s fourth most powerful telecommunications company as well.
Wireless service has been added in recent years to the offerings of the three prominent long-distance companies, AT&T Corp., Sprint Corp. and MCI Communications Corp. WorldCom did the same in late July with its purchase of Choice Cellular of Phoenix, the sixth largest cellular reseller in the United States.
Choice has more than 35,000 resale subscribers in Utah and Arizona; it resells service from AirTouch Communications Inc., AT&T Wireless Services Inc. and Bell Atlantic Nynex Mobile. Choice also has paging resale agreements with Paging Network Inc. and others.
Choice will become WorldCom’s wireless division, through which other wireless initiatives will be orchestrated.
“WorldCom has put its toe into wireless, so now its next move must be bold,” said Michael Elling, telephony analyst with Prudential Securities. “There is still room for further acquisition.”
WorldCom’s previous deals have not been without confidence. The Jackson, Miss.-based company bought WilTel Network Services in January 1995 for $2.5 billion, acquiring one of the country’s four extensive fiber optic transmission backbones.
Last week, WorldCom acquired MFS Communications Co. Inc. for $12 billion in stock. Omaha, Neb.-based MFS is a competitive access provider to private business and government offices, rivaling the local exchange carrier. Since 1987, MFS has built more than 200,000 fiber miles and connected at least 5,700 buildings; the company says it provides or is developing service in 50 U.S. metropolitan areas. It supplies local private line, special access digital communication services, advanced data and a suite of switched services.
MFS also recently acquired UUNET Technologies Inc., an Internet provider for businesses.
These transactions enable WorldCom to provide cellular, paging, data, Internet, local phone and long-distance service to businesses. The list of offerings is similar to that of the MCI One package.
“Right now, WorldCom is targeting mid- to small-size businesses. They are not in the high-end market of Fortune 1,000 companies, and not much in the mass market,” Elling said. But the company has set itself up to be one of the big competitors, he said.
“They’ll have to take a large part of the telecom pie to justify their current value,” Elling said, which has been estimated at $23 billion. WorldCom’s revenue last year was less than $4 billion; MFS’ was under $600 million.
MCI entered the wireless field last year after it purchased Nationwide Cellular Service Inc. and its 275,000 resale subscribers. Nationwide was by far the largest cellular reseller in the country; no single acquisition of that size is possible now.
Looking at a list of the Top 20 U.S. cellular resellers, the next tier of resellers includes three companies with between 70,000 and 50,000 subscribers, and 16 other companies with fewer than 40,000 subscribers. Many count less than 10,000 customers.
However, companies launching personal communications services networks in the next two years are known to be interested in resale contracts so they can quickly load the new systems with subscribers and compete with entrenched cellular operators.
