America's No. 1 financial conglomerate

Chapter 537 Tripartite Understanding

"If you need any help with WorldCom, feel free to contact me anytime," Armstrong said.

"Old fox," Ernst muttered under his breath.

Ultimately, I am not a telecommunications professional; I am an outsider. In this field, which is monopolized by both capital and technology, the conflict between Armstrong and WorldCom is the truly irreconcilable core conflict.

WorldCom's rise is a classic example of mergers and acquisitions by some of the largest American companies in the 1980s and 90s.

Its predecessor was LS Company, founded in 1983, which specialized in long-distance call rate discount services and was struggling to survive.

In 1985, when Bernard Ebbes became CEO of LS, he realized that in order for LS, which focused on discounted long-distance calls, to gain a foothold, it had to expand its customer base through acquisitions to achieve economies of scale.

Within six months of taking office, he successfully acquired a small telecommunications-related company. This small acquisition became a turning point for the company, which not only turned a profit but also achieved an annual revenue of $8.6 million.

This acquisition solidified Ebers' development strategy centered on mergers and acquisitions.

In August 1989, LS completed the acquisition of Avantae, and with this acquisition, it successfully went public on the NASDAQ market through a reverse takeover. Ebers' merger and acquisition ambitions were supported by the capital market.

In 1992, it beat out industry giants such as AT&T and Sprint to successfully acquire Advanced Telecom for $7.2 million.

This transaction significantly expanded WorldCom's scale, achieving a qualitative leap, and also triggered a strong response from the capital market. The company's stock price surged in a short period, and its market capitalization more than doubled.

In 1993, WorldCom acquired Urban Media Communications Company and Fuxing Communications Group, laying the foundation for its subsequent nationwide business expansion.

A year later, WorldCom acquired ib Communications Group, which had a mature business system in cross-border communications services, strengthening WorldCom's capabilities in long-distance and international communications.

In 1995, WorldCom completed its acquisition of Williams Technology Group and changed its name to LS WorldCom.

Williams Technology Group's technological resources have supplemented WorldCom's communication technology research and development capabilities, allowing WorldCom to upgrade its telecommunications technology on its own without worrying about being held back by its competitors.

However, what truly propelled WorldCom to become the American telecommunications giant it is today were two acquisitions this year.

In February, WorldCom acquired Compx from Harris Group.

WorldCom retained Compx's network services division and swapped its online services business with AOL in exchange for AOL's network division, ANSI, thus creating its own network services chain through asset integration.

Just this past September, WorldCom and MCI officially announced the completion of their merger, making them the second largest long-distance telephone company in the United States.

In fact, the two sides announced a $37 billion merger plan last November, which set a record for US acquisitions. However, the merger was officially completed just last September.

This acquisition tripled WorldCom's revenue and boosted its market capitalization to over $800 billion.

The rapid rise of WorldCom Group inevitably triggered a dramatic upheaval in the industry landscape. Its core businesses highly overlapped with those of Telephone & Telegraph Group, both focusing on long-distance telephone services and enterprise communication solutions. Given a relatively stable market size, WorldCom's rapid expansion inevitably meant that Telephone & Telegraph Group's market share was squeezed and its business contracted.

For major investment institutions and shareholders on Wall Street, this kind of competition within the industry is irrelevant, because they all hold shares in both WorldCom and TT Group. Regardless of which company wins, the final profits will flow into their own pockets, meaning the profits will remain within their own companies.

But for Armstrong, that touched upon his own interests.

As the CEO of Telephone & Telegraph Corporation, the company's performance was directly linked to his personal bonuses.

Every bit of expansion WorldCom generates a bit of market share for Telephone & Telegraph Corporation, which in turn affects the company’s financial performance and significantly reduces the dividends, stock options, and other incentives he receives.

Armstrong doesn't want to confront WorldCom head-on, but he wants to push him to the forefront.

But he couldn't stay out of this, because Worldcom had now set its sights on him and come knocking on his door.

While dedicated lines pose a threat to Wall Street, a closer examination of the underlying interests reveals that they may not necessarily be at a disadvantage.

The shortage of seats is simply a matter of who has more money; the giants aren't afraid at all.

So what if we spend a lot of money? Maybe we'll even make a huge profit in the long run, because the Telephone & Telegraph Corporation's stock price will soar.

But things were different when Continental Telecom was in Ernst's hands; Wall Street would never allow it to grow and expand.

The outcome of the WorldCom and TT Group wars is now history, but Ernst's entry into the telecommunications industry is a different story. He said Continental Telecom was trying to coerce Wall Street, but what if that's the case?

With the internet booming and the market value of telecommunications companies related to internet services soaring, they absolutely would not allow Ernst to further expand into the telecommunications industry.

We must either destroy mainland China Telecom or stop its offensive.

Now that we know what the problem is, let's solve it.

Solving the mainland telecommunications issue would also benefit WorldCom.

If WorldCom could acquire Continental Telecom, it would not only gain access to the coveted New York market, the heartland of Telephone and Telegraph Corporation, but also further expand its network business.

WorldCom took the lead, and Wall Street provided support; the two sides reached an understanding without prior communication.

The target was China Telecom. Ernst had to fight even if he didn't want to, and Armstrong took the opportunity to push him to the forefront to face the first wave of losses from WorldCom.

It can be said that all three parties have their own purposes and calculations.

Having figured all this out, Ernst decided to take his leave and go back to think about how to deal with the situation in his own best interest.

Before he could even speak, the phone rang.

"I'm sorry," Ernst said politely, then answered the phone. The call was from Ivan Setonberg, and Ernst's face darkened after hearing what he said.

After hanging up the phone, Ernst was about to say something to Armstrong when his secretary walked in.

"Mr. Armstrong, just now, Commissioner Tillman of the Trade Commission said in a media interview that an investigation may be launched into Chinese telecommunications companies to see if they are affecting fair trade practices in the United States."

Ernst glanced at his secretary, then turned to Armstrong. "Looks like I won't waste my breath."

Ivan Setonberg just told him about this, but in more detail.

"Tillman said that the Internet is the future, and all sectors of the United States hope that the Internet industry can develop smoothly and steadily."

"But," Ernst paused for a moment, "that doesn't mean that any company can exploit this industry for shameless and illegitimate profits."

Armstrong's face darkened considerably after Ernst finished speaking, while Ernst's expression brightened considerably, and he watched him with a cheerful smile.

Improper profits?

With fewer trading lines, will a number of futures trading companies be eliminated?

This reason doesn't hold water. You can't say that just because I sell clothes in one city, I have to have the sales volume of clothes all over the world, right?

I'm not a monopoly, and other telecom companies can learn from me. No matter how many futures trading firms on Wall Street protest this way, it's useless. Dragging this out will only result in a victory for mainland China Telecom, because it's legal and compliant; there's no question of unfair profit-making.

The only thing facing mainland China's telecommunications companies that can combat their illegal and irregular activities is their licenses.

When we partnered with Telephone and Telegraph Corporation, licensing was also a consideration, and this aspect was handled by Telephone and Telegraph Corporation.

However, licenses are not something that can be obtained immediately upon application; it is normal for it to take six months to a year.

Ernst did not inquire further, because he believed that the Telephone and Telegraph Corporation would handle the matter before Continental Telecom officially commenced operations.

But now, someone is going to call the Telegraph Corporation in the lurch.

The fact that someone from the Trade Commission has spoken out indicates that the licensing issue will definitely be stalled.

"Don't worry about the license. I'll say it again: before the end of the year, there will be no hardware obstacles preventing mainland China Telecom from operating."

Armstrong is pointing fingers at Ernst; if the hardware obstacle is gone, then only the software obstacle remains.

What is software obstruction?

Of course, it's Worldcom.

I'll take care of the license issue for you. As for Worldcom's relentless pursuit, that's your own problem. Ultimately, I still want him to have a head-on confrontation with Worldcom.

But can you really solve the hardware problem?

Ernst glanced at him subtly, indicating his suspicion.