WorldCom to Transfer Wireless Customers
PHILADELPHIA (Reuters) - WorldCom Inc., the bankrupt U.S. long-distance telephone company, on Monday said it had reached agreements to transfer nearly 2 million wireless phone customers to other service providers as it prepares to close its money-losing wireless unit by the end of September.
WorldCom said it will transfer its customers to AT&T Wireless Services Inc. (NYSE:AWE - News), Verizon Wireless, Alltel Corp. (NYSE:AT - News) and a fourth carrier that it declined to be named. Cingular Wireless was not part of the agreement, WorldCom said.
Clinton, Mississippi-based WorldCom (Nasdaq:WCOEQ - News) said last month it planned to exit the wireless telephone business. The unit, which resells services from the top two wireless carriers in each market under its own brand name, generates about $1 billion in revenue.
WorldCom said while it received a negligible amount of money for its customers, the closing of the unprofitable unit will save $700 million a year. It forged the agreements before filing for bankruptcy, so the pacts are not subject to scrutiny by the bankruptcy court.
The company entered the wireless resale business more than five years as a first step toward becoming a facilities-based carrier, but that never materialized. It had hoped to gain a national wireless network through a planned merger with Sprint Corp. (NYSE:FON - News; NYSE:PCS - News), but regulators blocked that deal and WorldCom's wireless business remained stagnant.
WorldCom also aims to sell assets in Latin America and Japan, and other non-core operations. WorldCom on Monday also tapped two members of a corporate turnaround firm to oversee its restructuring and straighten out its finances.
CUSTOMERS TO SHIFT TO NEW CARRIERS
The wireless customers will keep their existing telephone numbers and service will be uninterrupted during the transition. Some WorldCom Wireless employees will remain with the company during the transition, but the bulk of workers already have been fired as part of WorldCom's effort to cut 17,000 jobs.
AT&T Wireless, the nation's third-largest wireless operator, said it would get about 600,000 WorldCom customers. Redmond, Washington-based AT&T Wireless said it would only pay WorldCom for creditworthy customers who remain on its network for at least four months.
Verizon Wireless is a joint venture between Verizon Communications (NYSE:VZ - News) and Britain's Vodafone Group Plc (London:VOD.L - News).
WorldCom, however, has not yet reached an agreement with Cingular Wireless, another carrier whose services it resells.
Cingular, the nation's No. 2 wireless telephone company, last week asked the bankruptcy court for permission to transfer some WorldCom customers to its service.
Atlanta-based Cingular, a joint venture of BellSouth Corp. (NYSE:BLS - News) and SBC Communications Inc. (NYSE:SBC - News), requested an "appropriate deposit" to continue to provide wholesale service to WorldCom if it was not allowed to contact the subscriber base and provide service directly.
"It's unfortunate that Cingular can't see the inherent value in the transactions but we're hopeful that they will," said WorldCom spokesman Brad Burns.
Last month, WorldCom disclosed it improperly recorded $3.85 billion in expenses and fired former Chief Financial Officer Scott Sullivan, who it alleged orchestrated the accounting debacle. Former Chief Executive Bernie Ebbers resigned under pressure in April.
WorldCom, which transmits half of the world's Internet traffic, was charged with fraud by the U.S. Securities and Exchange Commission and faces an investigation by the Department of Justice. It filed the world's largest bankruptcy petition earlier this month.