No major MCI job losses expected 1,500 in area appear safe after the merger

November 05, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

The 1,500 people who work for MCI Communications Corp. in metropolitan Baltimore appear to be safe for now.

But it's not clear how big an impact the Washington-based long-distance giant's $21 billion merger with British Telecommunications PLC will have on consumers in Baltimore and other U.S. cities.

MCI executives have said they don't expect the merger to lead to major job losses. Yesterday, they would not say that employees at marketing centers in Towson, Hunt Valley and Linthicum Heights would not be affected by the deal, but hinted that more growth is more likely than big cuts.

"MCI's employment base will probably continue to grow," said Michael Beach, MCI vice president for local service.

"As to particular cities, I don't have any idea."

Part of the point of the deal was to allow MCI to tap the deep pockets of British Telecom, which has about 30 percent higher annual sales and makes almost three times the profit of its soon-to-be junior U.S. partner, for money to expand in the $100 billion U.S. local phone service business, which is being opened to competition.

But executives of MCI and its competitors said the way things turn out in real life may not be as neat as the plan on paper.

"It's important to have the clout and the size and the scope to enter local markets," Beach said. "But what you have to remember is, the rules aren't written yet."

The rules that Beach is talking about are prices to be set by state regulators under the new federal telecommunications law, which requires longtime local phone monopolies -- Bell Atlantic Corp. in Maryland -- to lease all or part of their call-handling networks to companies such as MCI that want to get into the local phone business.

In Maryland, prices will be set in a Public Service Commission order due Friday.

The law requires this sharing because Congress decided it was a necessary step to encourage competition.

Without it, the upfront investment in call-handling networks would simply be too steep for most new players to bear.

The law opts for a sort of phased-in competition. Regulators hope it will let new entrants make enough profit -- from selling phone service that they buy wholesale from the monopolies or from service that they generate by building partial networks and buying other services -- to build their own networks within a few years.

The new networks are the key to full competition that forces phone rates lower, Beach said.

"Clearly, building your own network is the end game, and we have a partner who helps us," Beach said.

"It takes a lot of money to build these networks."

But many competitors were little impressed. They argue that MCI, with annual sales of almost $19 billion and only about $3.5 billion in long-term debt, has plenty of borrowing capacity already to build networks. And they doubt that British Telecom's experience in the local telephone business will be useful in the United States.

"I don't think it will have any effect," said Royce J. Holland, president of MFS Communications Co. Inc., the Nebraska company that has emerged as the first major competitor to Bell Atlantic in providing local service to businesses and government agencies in Maryland. "MCI will continue to be MCI in the U.S. In the U.S. and the United Kingdom, it's going to be business as usual."

Holland said consumers may not gain much from the MCI-BT merger, but they are almost certain not to be hurt.

But he said MCI probably is two to three years away from building local phone networks big enough to compete for consumers' phone business.

MCI local networks already serve business accounts here, and the company plans to buy service wholesale from Bell Atlantic and resell it to consumers. But MCI has said that building a full network to serve residential customers is too expensive in the short term.

Bell Atlantic would not comment yesterday on the merger's impact on its competitive plans.

"If you've got a 450-pound gorilla and it becomes a 600-pound gorilla, it doesn't matter," said Bell Atlantic-Maryland spokeswoman Sandra Arnette.

"There's going to be a lot of competition out there, and we're up to the challenge."

One smaller Baltimore-area company striving to enter the local service industry was betting that somewhere in the billions of dollars being thrown around would be a few with its name on them.

"Generally, the merger will focus attention by investors on local [phone] service," said Richard A. Kozak, chief executive of Annapolis Junction-based American Communications Services Inc., which is aiming to compete in local service mostly in smaller Southern cities.

"It will let companies like us have more access to capital more easily."

Kozak was doubtful, however, that the deal would mean change that consumers will notice soon.

"It will only happen after MCI goes through the shock of merging the two countercultures" of MCI, which has always seen itself as an upstart rebelling against AT&T Corp., and its new partner, which was a British government agency until the Margaret Thatcher years.

"Organizations go into paralysis until people decide who gets what job," Kozak said.

Pub Date: 11/05/96

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