UUNet says it has no WorldCom worries

Johannesburg, 24 May 2002

American telecommunications company WorldCom has had a rocky time lately, with founder and CEO Bernie Ebbers resigning under a cloud, and questions about the company`s accounting methods and future prospects as its share price plummets and debt falls due.

But local subsidiary UUNet SA says whatever troubles its parent company has will hardly affect it at all, and customers have not expressed concern.

"Our focus on the business going forward is positive," says local head David Meintjies. He says turnover for this calendar year will be around R650 million and the business is cash-positive month-on-month, with enough cash on the side for smaller capital projects.

WorldCom was responsible for the capital used in UUNet`s project to roll-out a satellite IP backbone across the continent, but Meintjies says the funding required has already been fully capitalised.

However, everything has not gone exactly according to plan as the company expands across the rest of the continent. In late 2000, UUNet entered a joint venture with fellow Internet service provider Africa Online. Africa Online was to transfer its corporate customer base in eight African countries to the new entity, and UUNet would supply the backbone for the Africa Online dial-up business.

But Meintjies says UUNet took over the customer base in only one country, Kenya, and started operations in Zambia, where Africa Online had a licence to operate but no active customers yet. In the other six countries - Uganda, Tanzania, Swaziland, Zimbabwe, Ghana and C^ote d`Ivoire - it no longer has any interest.

"The regulatory environments there are not very favourable and we are not comfortable with the massive investment that would be required," he says. He also cites uncertainty about the property rights in some countries and onerous or uncertain licence conditions in others.

Also taken into consideration was a recent boardroom coup in which Africa Online CEO Ayisi Makatiani was apparently ousted by shareholder The African Lakes Group, a company listed on the London and Nairobi stock exchanges.

"We saw eye-to-eye with Ayisi," says Meintjies.

UUNet has operations in Namibia and Botswana which were not included in the Africa Online deal, and is spending around R2 million building satellite earth stations in those countries.

WorldCom "not in trouble"

While UUNet tries to find a grip on the African continent, its parent company, with $30 billion in junk-rated long-term debt, says its problems are a matter of perception.

"Bankruptcy is not an option for WorldCom," says corporate communications VP Brad Burns. "WorldCom has a perceived liquidity issue, not a real liquidity issue."

It also denies that it has lost customers due to recent uncertainty. However, its new management team is developing what it describes as "a new strategic direction", which could see non-core assets sold. UUNet, both internationally and locally, is unlikely to be classified non-core.

And should Africa present opportunities that demand dollar-spend, the cash will be there, it promises, particularly if the business case is solid, more solid than that of investing in a 51% stake in SA`s second national telecommunications operator.

"Capital spending is under review, but it is always under review," says investor relations VP Scott Hamilton.

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