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The countrys top telecom cop wrote to WorldCom Inc. CEO John Sidgmore today on the heels of the companys bankruptcy filing, admonishing him to keep his regulatory duties in mind during the reorganization and to “take these requirements seriously.”
Despite Sidgmores public assurances on Monday that WorldCom intends to emerge from bankruptcy stronger than before and that services will not be affected during the restructuring, Michael Powell, chairman of the Federal Communications Commission, outlined the obligations that WorldCom is required to take before shutting off services.
Regardless of the companys financial circumstances, Powell said, the FCC must approve license transfers related to interstate telecom services and wireless services. Therefore, before WorldCom could be acquired by another party — as a whole or in parts — the FCC must authorize the license transfers. If bankruptcy leads to service discontinuation, WorldCom must obey a series of notification requirements, including preventing service impairment until the FCC certifies that that the public interest would not be adversely affected.
“I remind you that any violation of these requirements may result in enforcement of action against WorldCom and any individuals responsible for the violation,” Powell warned Sidgmore.
Before discontinuing domestic service, WorldCom would have to provide written notice to customers and would have to wait a minimum of 31 days after the FCC issued a public notice of WorldComs action.
“[The discontinuance process] is intended to provide customers with a reasonable opportunity to find and transition to a new service provider, and the Commission will act promptly and vigilantly to ensure that customers are provided this opportunity,” Powell wrote.
The FCC chairman also advised Sidgmore that he would intervene in the bankruptcy proceedings.
Mired in debt and plagued by an ongoing accounting scandal, the telecommunications giant filed for Chapter 11 bankruptcy protection Sunday. And while the move indicates there will be no quick rebound from the companys legal and financial woes, officials hope the filing will keep the carrier and its services intact while a reorganization plan is developed.
WorldCom Seeks Bankruptcy Protection
In Mondays press conference in New York, Sidgmore said the company filed for bankruptcy in order to secure the debtor-in-possession financing it has arranged. Sidgmore said he hopes the bankruptcy court approves the new financing today.
“I regret that we are in the position we are in today,” Sidgmore said. “We fought hard and frantically to avoid this.”
WorldComs mammoth debt amassed over the years required major refinancing, but the recent book-keeping scandal limited its capital-raising choices.
“The debt had become over the last couple years the enemy of our company, had threatened our viability and drove our stock price down to nearly a dollar,” Sidgmore said. “These accounting problems unfortunately reduced the options that were available to us on the refinancing front.”
Despite Sidgmores recent protestations that bankruptcy was not the “preferred” path for WorldCom, the Clinton, Miss. carrier filed its petition in the U.S. bankruptcy Court for the Southern District of New York. In a press release issued late Sunday, Sidgmore said WorldCom will be able to continue business as usual while it reorganizes.
“Chapter 11 enables us to create the greatest possible value for our creditors, preserve jobs for our employees, continue to deliver top-quality service to our customers and maintain our role in Americas national security,” Sidgmore said in the statement. “We will use this time under reorganization to regain our financial health and focus, while operating with the highest integrity. We will emerge from Chapter 11 as quickly as possible and with our competitive spirit intact.”
At the same time it announced the bankruptcy filing, WorldCom announced that it tentatively procured “up to $2 billion” in debtor-in-possession financing, subject to approval by the court.
In addition to the companys assurances that it intends to continue services, regulators and lawmakers are highly vested in helping ensure continued coverage. FCC Chairman Michael Powell said Sunday that the commission “will act vigilantly, and to the full extent of its statutory authority, to protect the integrity of the telecommunications network and protect consumers against any abrupt termination of service.”
The FCC is authorized to order telecommunications carriers to sustain service, and, according to sources, the FCC will also intervene in the bankruptcy proceeding to ensure that the judge understands the importance of continued operations.
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