STA Travel bets on Worldcom for $12m network

NEWS STA Travel is putting its faith in troubled telco WorldCom as it seeks to build a global virtual private network (VPN) worth $12m. VPN provider Sirocom will lead the three-year contract and is confident that WorldCom can provide the bandwidth. Sirocom will work on the implementation to connect STA's 400 global offices and its data centre in Eagan, Minnesota. Claire Reece, VP of information systems at STA Travel, said in a statement: "We need to know that we can rely on our networks." Despite financial worries surrounding WorldCom, Sirocom insisted that the network provider was not a weak link in the deal. Simon Rogan, MD of Sirocom, said: "We are confident that WorldCom is not another Global Crossing." Rogan added: "WorldCom's financial status is a concern but we believe once you unravel all the hype around the financial news, it's a pretty solid company." But Michael Funk, US telco equity analyst at Barclays Stock Brokers, was more concerned with WorldCom's financial future. He said: "You can't rely on WorldCom remaining a going concern. We've seen AT&T and Sprint actively pursuing WorldCom customers this week and if customers do start defecting, it may create a problem where WorldCom has to file for Chapter 11." Last Friday, shares in WorldCom crashed 13.5 per cent as its shares were reduced to junk status. Executives have started to leave and the Securities & Exchange Commission is investigating WorldCom's accounting practices. In April the company slashed $1bn from its revenue predictions for the rest of 2002. Funk continued: "If WorldCom customers don't leave, it shouldn't have a liquidity problem for the next few years." Funk said it is unlikely that customers would leave WorldCom as it is one of the only companies around that are able to run enterprise-wide IP systems on a global basis. The first stage of the project goes live this month.