Executives at WorldCom and City analysts were yesterday insisting there would be little short-term impact on telecoms services in the UK in the wake of the accounting irregularities uncovered at the US telecoms company.
WorldCom promised the UK watchdog Oftel that there would be "no immediate threat" to telecoms services in the UK. "They're operating on a business as usual basis," a spokesman for Oftel said.
Nevertheless, he said executives from the company would be meeting with the regulator "in the next few days" to go over the potential impact in further detail. "It'd be wrong for us to comment on what might occur if a, b or c happened," he said.
Meanwhile, WorldCom's 4,000 staff in Britain, at its sites including Reading, Cambridge, Manchester, Leeds, Edinburgh, Bristol and London, were last night waiting to find out what would happen to their jobs after the US giant announced it would cut another 17,000 staff worldwide from this Friday.
Although WorldCom does not have any debt repayments due in the next six months, analysts yesterday speculated that it was in technical default with its banks after it admitted it had improperly booked $3.8bn worth of expenses as investment. As a result it will restate its earnings for the past five quarters, wiping out its profits from the start of 2001. Even before Tuesday's announcement, WorldCom had been trying to put together a $5bn secured credit facility to secure its long-term future.
Financial analysts predicted that even if WorldCom were to go bankrupt, "the business would be kept alive until it was sold off". Others predicted UK companies including BT and Colt Telecom might well be among those to benefit if customers start deserting the US carrier. "The good news if WorldCom goes bust is that BT will be a beneficiary and so will Colt," Jim McCafferty, an analyst at SG Securities, said.
In the immediate aftermath, however, analysts were left weighing up the impact on the sector as a whole as the accounts of telecoms companies across Europe came under fresh scrutiny. "There's a bit of a witch-hunt going on. People will be looking very carefully at all the [telecoms] operators," Mr McCafferty said.
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