WAFFLING ON WIRELESS

WorldCom's decision to exit the wireless voice resale business is hardly big news. WorldCom has never viewed mobile wireless as a strategic asset. The provider only half-heartedly promoted its resale service, and the business never reached EBITDA-positive. However, in the midst of its debt woes, WorldCom's lack of a sound mobile wireless strategy may come back to bite the company. While growth is slowing somewhat in the mobile voice market, the business still is one of the brightest spots for providers that hold a diverse group of telecom interests. Cash flow is strong for most of the companies that own wireless properties, helping to offset some of their other under-performing telecom assets. And another factor is making some long-distance providers shake in their boots: Wireless carriers are beginning to take a significant chunk of minutes away from them. For example, Sprint announced its consumer long-distance voice volumes in the first quarter were down 10%, attributing the majority of the shortfall to wireless substitution. Merrill Lynch estimated that AT&T's consumer long-distance revenue will fall 25% year over year in 2002, with more than half of the decline attributable to wireless replacement. WorldCom spent most of its time building up too much capacity in the landline market, but wireless will always be a business where demand for capacity exceeds supply.