WorldCom Asia - customers staying put

Despite teetering on the brink of bankruptcy, global telecommunications firm WorldCom says customer retention isn't an issue with its corporate clients in Asia, echoing statements earlier this month made by the company's European operations.

On 21 July, WorldCom filed for Chapter 11 bankruptcy protection after allegations the company had improperly accounted for almost $4bn on its corporate balance sheets during the past five quarters. Early this month, the firm revealed an additional $3.3bn in earnings that were improperly recorded on its books. The company also lists $41bn in debt.

Chapter 11 is a bankruptcy protection law only applicable in the US. It gives a company time to reorganise and straighten out its finances while keeping creditors at bay.

"It's business as usual for us in Asia," said Mark Russell, WorldCom South Asia managing director.

Russell said its Asian customers have not abandoned the company despite its situation in the US. "Across the region, we have not seen an increase in customer churn rate. In addition, we have not seen any large multinational firms leaving us due to our situation," he said.

"This is because we have been busy communicating to customers that the filing for Chapter 11 does not affect our Asian operations and our abilities to provide services," he said in an interview.

According to Russell, WorldCom has 22,000 clients across the region. They include pharmaceutical firm Pharmacia & Upjohn, ABN AMRO Bank and analytical instruments maker Perkin Elmer in Singapore, shipping firm Wan Hai Line and computer maker Benq in Taiwan, as well as Korea systems integrator Hyundai Information Technology and Korea Electric Power.

When contacted, ABN AMRO spokesperson Jochem van de Laarschot confirmed the bank has no immediate intention of switching service providers.

"Under the current circumstances, we will keep a close eye on the developments at WorldCom until the contract expires at the end of the year," Amsterdam-based van de Laarschot said.

"We will evaluate the contract and the services and decide about the future of our relationship then and re-evaluate our position before that if circumstances change."

Despite its financial woes, the long-distance carrier is confident of registering over 10 per cent revenue growth in Asia-Pacific this year, said WorldCom's Russell.

Taking Singapore as an example, the firm exceeded its revenue and order entry targets in June and July, said David Rich, WorldCom's general manager for Singapore.

"These are targets set during the fourth quarter of last year and we haven't adjusted them following the bankruptcy filings," said Rich, who declined to reveal actual sales.

Russell could not comment on the performance of other Asian markets but expressed confidence that WorldCom will emerge a stronger, leaner company following the restructuring, which will see its unprofitable businesses sold and workforce cut. It has 2,000 employees in Asia-Pacific.

Russell also said WorldCom secured $2bn in financing from JP Morgan, GE Capital and Citigroup to tide over this crisis.

"WorldCom has the largest internet IP network globally transmitting half of the world's internet traffic. These things don't change," he added.

The Mississippi-based carrier has over 17 points of presence in the region - including Australia, Hong Kong, India, Japan, Korea, Malaysia, Singapore and Taiwan - providing high-speed data, IP and voice services. It has also established metropolitan networks in Australia, Japan and Singapore.

Analysts had earlier said regional telcos such as Singapore Telecommunications, Telstra in Australia and Japan's NTT will benefit from WorldCom's troubles.

However, Russell disagreed. "I don't believe it. We don't see it happening. Moreover, we exceeded revenue targets in Singapore and are still getting enquiries from competitors' customers for quotations."

Irene Tham writes for News.com