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June 20, 2022

WorldCom: 20th year obituary anniversary

Twenty years ago, in July 2002, WorldCom filed for bankruptcy (the largest in the USA at the time) during a time when a number of corporate fraud scandals hit the States. Subsequently, the legacy MCI WorldCom, having been cleaned up and returned to legitimacy, was acquired by Verizon in January 2006.

Originally conceived almost literally on the back of an envelope in a Mississippi coffee shop, WorldCom grew by the aggressive acquisition of over 60 smaller telecoms companies. Arguably, it significantly first entered the global stage through the acquisition of MFS Communications, which included the highly successful UUNET Technologies – a leading player in Internet services at the time.

Subsequently, in 1997, WorldCom acquired MCI to create MCI WorldCom from under BT’s nose for $37 billion.

Ironically, this could be seen as BT’s most commercially successful international investment (it already held 20% of MCI) as it had intended to form Concert in a $22 billion merger, combing BT’s existing activities with those of MCI to serve multinationals, enterprises, and other customers around the world.

When the WorldCom wheels wobbled

In 1999, MCI WorldCom looked to merge with Sprint, but the mooted $129 billion combination was scuppered by regulators in the USA and Europe as it was seen as anti-competitive. This was the first sign that the wheels were starting to come off and an indication that ‘creative’ accounting methods were being used to hide the financial truth. Subsequently, the famously eccentric cowboy boot-wearing CEO Bernie Ebbers was imprisoned for 25 years but passed away in 2020.

Every morning the first thing MCI WorldCom employees would see in their email was the stock price, which is an indication of where the company’s focus lay until the fraud was revealed. However, it cannot be denied that the company’s impact on the telecoms market both in the USA and globally was substantial: its aggressive strategy and pricing shook up what was still a relatively quiescent market even post deregulation. Although it was riding on the back of fraudulent accounting, WorldCom did have a significant market impact and was one of the first telcos to embrace the fundamental changes the Internet would have on communications – even if the CEO himself was focused on ‘other matters.’