WilTel pushes toward enterprise voice

WilTel Communications not only has secured an amicable divorce from SBC Communications--by far its largest customer--but has regained custody of its right to sell voice services to enterprise customers in the process.

Those rights are a key part of WilTel’s strategy going forward, as the company indicated last week by announcing its foray into enterprise voice services, where it will concentrate on large enterprise customers and its ability to customize voice-data offerings.

The announcement came only days after WilTel and SBC announced their new Master Services Agreement, terminating the original deal under which WilTel provided SBC with its out-of-region long-distance service and SBC provided WilTel with 70% of its network revenues.

“The SBC deal is really good for WilTel,” said David Hold, senior analyst, network services, at Current Analysis. “It’s everything WilTel could have hoped for. It gives them guaranteed income for the next four years, which buys them some time to diversify their strategy, which they are doing now with the enterprise focus.”

SBC agreed to pay $236 million to terminate the original deal and to buy a minimum of $675 million in WilTel voice and data services, at current price levels, between now and 2009. Under the current conditions, that would translate into $2.7 billion in operating revenues, according to the SEC 10-7 form filed by Leucadia, WilTel’s parent company, although since the mix of services will change, that figure is likely to change as well.

WilTel will continue to provide wholesale services to service providers, said Blaine Gilles, senior vice president of voice services and strategic markets, even as it targets the top echelon of enterprises.

“We will maintain a very strong support for our carrier customers,” he said. “They are the primary channel that we have to sell to end-user subscribers.”

But WilTel must diversify to survive, Hold said.

“I don’t know of anybody who had the kind of dependence on one customer that they had on SBC,” he commented. “It is probably necessary for survival that they diversify. There is always a risk when you are a wholesale carrier, that selling retail services will put you in competition with your customers. But they say most of their wholesale customers are either targeting consumer residential or mass market or small business customers.”

In targeting large businesses, WilTel is taking on AT&T, MCI, the regional Bell companies and other national players such as Broadwing, Global Crossing and Qwest Communications.

WilTel plans to differentiate by offering a high-degree of customization in the way it packages voice and data services to meet its customers’ needs, said Gilles.

“Our biggest differentiator is that we have excellent service quality,” he said. “Our existing customers are the biggest there are. We have global capabilities and can terminate traffic anywhere in the world.”