6 August 2002 Telecoms giant WorldCom has denied press reports that sales have halved at its European arm since it filed for bankruptcy protection in the US in July 2002. The reports – first printed in the Financial Times (FT) – have triggered renewed speculaton that WorldCom, will soon sell its European business.
According to the FT, WorldCom International CEO Lucy Woods highlighted the company’s financial woes in a conference call to senior employees. She apparently said WorldCom’s revenues normally fell in July and August, but not by this amount – around 50%.
However, WorldCom executives are now denying that sales fell that heavily. A WorldCom spokesperson speculated that a disaffected employee may have distorted the contents of the conference call.
The FT also reported that WorldCom International is burning up cash at around $500 million (€508.6m) per annum.
Although the amount is in dispute, a sharp fall in sales at WorldCom would have been inevitable. Most major telecoms companies have suffered a downturn in sales during 2002 and in WorldCom’s case, this would have been made worse because of question marks over the long-term viability of the company. Some analysts have advised WorldCom customers to consider alternative carriers and make other contingency plans.
In the conference call – as reported by the FT – Woods denied WorldCom will sell its European business. However, she admitted that WorldCom’s administrators would begin discussions “over the next week or two” on the future of the company’s international arms.
Several venture capitalists, including Kohlberg Kravis Roberts and Carlysle Group, have contacted WorldCom with a view to purchasing parts of its European network, as has the UK’s British Telecom, the paper said.
In June 2002, WorldCom CEO John Sidgmore, who replaced co-founder Bernie Ebbers in April 2002, admitted that the company had overstated pre-tax profits by a massive $3.8 billion (€3.9bn), plunging the company into crisis.