Broadening world connections: MCI, WorldCom to focus on Spanish-speaking markets

With their own proposed merger just months ahead, this week MCI and WorldCom announced a series of agreements with Telefonica, the largest telecommunications service provider for Spanish-speaking countries. The move will help Telefonica penetrate a larger base of customers in Europe and give MCI and WorldCom opportunities to develop new programs and services in Europe and Latin America.

MCI and Telefonica also will target the rapidly increasing Hispanic consumer and small business markets in the U.S. through customized products and service programs. The partners said the Hispanic market in the U.S. is the fastest-growing demographic segment, with approximately 29 million people.

MCI already has promoted collect calling from customers in Mexico to relatives in the U.S., and other planned services include free calls from the U.S. to Mexico on Mexican Independence Day.

"It's a great venture for MCI because Telefonica brings to the table the largest operator for the Spanish-speaking world," said an MCI spokesman. Most of these promotions will be in place by the fourth quarter, following extensive research into national Hispanic demographics and calling patterns, he said.

Telefonica's interest in working with MCI is not surprising, said TeleChoice analyst Danny Briere. In April 1997 Telefonica joined the Concert international consortium, seemingly because MCI was part of the group. When WorldCom drew MCI away from Concert last fall, Telefonica left the consortium as well.

"It was highly supposed that Telefonica was looking to be with MCI," Briere said. "And MCI has already put a lot of effort into the Latin American market."

In this week's announcement, the partners estimated the total current value of the Latin American telecom market to be $50 billion, with a projected jump to $67 billion by 2000.

The agreements came just as the Justice Department announced it will widen its probe into the MCI/ WorldCom merger. Because both companies are major Internet carriers, helping to form the Internet backbone, regulators are studying the antitrust implications of the merger. However, Briere doubts that the merger could greatly limit competition in the Internet market.

"It's going to be a non-issue in two years," he said.

United States t MCI and Telefonica create a 70%/30% venture managed by MCI to provide customized products and services targeting U.S. Hispanic consumer and small business markets

Europe t Telefonica becomes a WorldCom European network distributor and has the option to acquire a 10% stake in a new WorldCom company

t Telefonica gets the option to buy 46% of WorldCom's existing Italian operations

t WorldCom and Telefonica partner to create a service plan for Eastern and Southern Europe

Latin America t Telefonica and MCI form Telefonica-Panamericana MCI to create an all-digital Pan-American network

t MCI has option to buy 10% of Telefonica International SA, the leading telecom provider in Latin America

Lucent Technologies' Optical Networking Group last week announced that it will deliver a bandwidth management package by the end of the year as part of its WaveStar product group.

The WaveStar Bandwidth Manager will integrate optical terminals, cross-connects and multiplexers in a single box, eliminating up to 10,000 central office coaxial cables otherwise required to link those elements, according to Lucent. The system can save carriers up to 60% on CO equipment costs, company officials said.

The new system is a natural follow-up to the WaveStar 400G, the 80-channel dense wavelength division multiplexing (DWDM) system Lucent plans to deliver in the fourth quarter, said Gerry Butters, president of Lucent's optical networking business unit.

"In January we served up more bandwidth," Butters said. "Today we're serving up a way to effectively manage that bandwidth."

The new system can deliver a half-terabit of capacity, but "the architecture is designed to be scalable down to some very small offices," said Scott Grout, product management vice president for Lucent Optical Networking.

Initially the WaveStar system will work with Sonet equipment from various vendors. Interfaces for asynchronous transfer mode, Internet protocol (IP) and DWDM are under development.

The system will support DWDM via open interfaces when it debuts in December, making it compatible with other vendors' DWDM systems, Grout said.

Tyco Submarine Systems Ltd., which operates a 14,000 kilometer undersea cable, will install the WaveStar system later this year.

The new system "isn't revolutionary in terms of functionality, but it is somewhat revolutionary in terms of integration," said Mike Arellano, analyst for Degas Communications Group Inc., New York.

The new system, which supports switching fabrics for various types of traffic, including ATM and IP, should be attractive to new and established carriers looking to move heavily into data transmission, Arellano said.

"Lucent is saying, 'Your networks may develop one way, but we'll be ready to provide whatever switching fabric you need-just plug in a card,'" he said.