Capellas: WorldCom Will Not Be Broken Up And Sold

"We have no intention of breaking up the company and selling the parts," Capellas said on a conference call with reporters. "The value of the company is as a whole, and I would not have taken the job if the intention was not to come out of bankruptcy."

Capellas laid out his goals on the call, with customer retention and high ethical standards among his top priorities.

An advisory council of 10 to 12 of WorldCom's top customers is being established, Capellas said. What's more, WorldCom's sales force is being revamped into an organization that will have more frequent contact with customers, he said.

Capellas described a new "zero-tolerance policy" now in place at the carrier.

"We will have an unwavering commitment to the highest possible standards of integrity," he said. "I've had a policy that I've followed my entire management career, and that is if there's ever a doubt or an act that is not compatible with our values, that employee is not an employee in the morning."

Outgoing CEO John Sidgmore described Capellas as a man of "great integrity, talent and accomplishments" that will bring "seasoned experience and obviously a completely new perspective."

"He starts with a clean sheet of paper and will have full support from the board of directors and from the creditors' committee, and from me, " said Sidgmore, who is staying on as vice chairman.

Observers say Capellas faces a Herculean task. He must grapple with a $9 billion accounting scandal, a Securities and Exchange Commission investigation and the ongoing bankruptcy reorganization, and also work ceaselessly to regain the public's trust in WorldCom.

"Capellas has the opportunity for the largest turn- around in the history of U.S. business," said David Morken, president of master agent Bandwidth.com, Research Triangle Park, N.C. "And I don't think that his lack of experience in this industry will be a problem. Bernie Ebbers [founder and former CEO of WorldCom would be the first to tell you he knew little about the ins and outs of telecommunications."

What concerns some partners is the impact on the industry should WorldCom emerge from bankruptcy with reduced debt.

"I'm not excited about the prospect of WorldCom surviving to only price the industry down, due to having substantially reduced debt, and potentially causing more of our partners to declare Chapter 11 and stop payments to their channels," said Greg Zulli, president, CEO and co-founder of CarrierChoice, Bethlehem, Pa.

WorldCom partners received a letter from the carrier in August stating that it is "prohibited" from paying out commissions owed to partners prior to July 22, due to bankrupcty law, according to a letter examined by CRN. The decision to pay out partner commissions will be determined when the court votes upon and approves WorldCom's reorganization plan, according to the letter.

Some partners said new leadership only stands to improve strained relations with the channel. "We're certainly looking forward to new leadership,"said the CEO of a master agent who asked for anonymity."We've experienced every known disaster to man from that (channel) program and anything that happens is going to be an impovement, short of it going away completely."

When Capellas was asked what he thought about competitors' remarks that, given the accounting scandal, it would be unfair for WorldCom to potentially emerge from bankruptcy with reduced debt, he said such sentiments were to be expected.

"Competitors don't want anyone to succeed," Capellas said. " When I was at Compaq, Michael Dell was not looking out for my best interest either."

Before handing the reins to Capellas, Sidgmore reviewed the strides WorldCom has made to clean up its tarnished reputation and rebuild the company financially. The actions Sidgmore cited include the firing of CFO Scott Sullivan and other executives involved in the accounting fraud, and building up a cash flow of $1.5 billion over the past few months.