Telecom has ties with Worldcom but little exposure

By NZPA

Thursday 27th June 2002

Telecom New Zealand has significant relationships with scandal-ridden telecoms giant WorldCom Inc, but minimal financial exposure.

WorldCom shocked global stock markets yesterday by revealing it had improperly booked almost $US4 billion ($NZ8.3 billion) in expenses as capital expenditure.

Telecom NZ public affairs spokesman Martin Freeth told AAP that Telecom and WorldCom had significant customer and supply relationships, and it would be closely examining that relationship.

For example there were swaps on the international call minutes market, as well as a data network relationship in the US.

"But we have minimal if any exposure to them in the context of our trading relationship, and no impact on our customers from that," he said.

Mr Freeth said it was business as usual with WorldCom regarding the Southern Cross Cable Network venture, and Telecom maintained its position regarding future dividend payouts from the venture.

"As we've previously indicated we lack visibility around the extent and timing of future dividends coming from Southern Cross Network as a result of softening demand for international bandwidth and cable capacity," he said.

The Southern Cross Cable Network (SCCN) says its expects minimal impact on its submarine cable operation from ongoing problems at WorldCom, which holds a 10 percent stake in the network.

The cable is 50 percent-owned by Telecom New Zealand, 40 percent by Optus and its owner Singapore Telecommunications Ltd, and 10 percent by Worldcom.

The cable is a 30,500-kilometre fibre loop connecting Australia, New Zealand, Fiji, Hawaii and California.

Southern Cross Asia Pacific director Ross Pfeffer told AAP that WorldCom helped operate a landing station for the trans-Pacific cable at the California landing point, but that operations there would remain as per usual despite reports of potential cuts at WorldCom.

Worldcom has sacked its chief financial officer and outlined plans to lay off 17,000 workers or about 20 percent of its global work force, and there is speculation that it could fall into Chapter 11 bankruptcy.

Mr Pfeffer said SCCN had continued to operate despite having to deal with another company in Chapter 11 -- WCI Cable, an Oregon company.

He said WCI Cable looked after the Oregon landing point for the SCCN cable, which came onto the US mainland at two different locations.

"There was absolutely zero impact on the operation of the cable station and we have no reason to believe there won't be zero impact on the operation of the cable station that WorldCom's looking after in California," he said.

"WorldCom is involved in many global cable systems and you can rest assured they will continue to operate -- if they go into Chapter 11 one would expect that the process that's structured behind that would just make that more certain," Mr Pfeffer added.

Mr Pfeffer said SCCN remained upgrading its network system, bringing on San Jose as a third US access point although a final date on when that would begin operation had yet to decided.

He said in the last three or four months in Australia the takeup of broadband services had increased noticeably and that would eventually drive demand for cable capacity.

"We have been in touch with a lot of ISPs and got some very encouraging news," he said.

Comments from our readers

No comments yet