Price wars and easily accessible alternatives have squeezed margins in the hotly competitive local-and-long distance telecommunications sector. "I don't think you'll see much marketing in the public domain," said Merrill Lynch telecom analyst Adam Quinton. "The consumer long-distance incumbents have cut spending already because they're losing traffic to the wireless and regional Bell operating companies."
WorldCom last week disclosed it had improperly accounted for more than $3.8 billion in expenses. The long-ailing company now could be headed into bankruptcy. Despite the absence of major new TV, print or other campaigns from rivals, most industry observers agree WorldCom and its MCI unit are vulnerable to losing customers-including in their corporate market.
on the Enterprise side
Mr. Quinton agrees "the action will be on the enterprise side through direct-sales people calling potential accounts more vigorously." He said officials at No. 3 long-distance provider Sprint, for instance, have created an incentive program for their sales team to take WorldCom business. Sprint denies it has such a program.
A spokeswoman for No. 1 long-distance supplier AT&T Corp. declined to discuss specifics of the company's ad plans but noted "we always take the current marketplace conditions into account when making advertising decisions." A spokesman said Verizon, a Baby Bell that's pushing hard into long distance, has no plans to alter current advertising.
A spokesman for WorldCom's agency, Havas' Euro RSCG MVBMS, New York, would not comment on ad plans; calls to WorldCom were not returned at press time. Havas' stock dropped after the announcement, then rebounded when the company affirmed that WorldCom's bills are current. Analysts have estimated the account makes up 1% of Havas' annual revenue.
Interpublic Group of Cos.' Deutsch, New York, which won the MCI consumer account in February, referred calls to the client, which wouldn't comment on ad plans. In a report following WorldCom's announcement, Salomon Smith Barney analyst William Bird estimated Deutsch generates $10 million annually from the account. Deutsch declined to comment.
Financial woes notwithstanding, MCI's name still has value, branding experts said. "It is not a goner," said Jeffrey Parkhurst, consultant, Omnicom Group's Interbrand. "Telecom is a dynamic space. [But] it'll take some smarts to bring the brand back."
contributing: emily aronson and mercedes m. cardona