MCI Raising Rates With Rivals

From Bloomberg Business News

MCI Communications Corp., the nation’s second-largest long-distance company, is raising rates along with AT&T; Corp. and Sprint Corp. as the companies try to boost profits ahead of wide-open competition in the U.S. phone market.

AT&T; had said earlier this week that it will raise basic long-distance rates by 5.9%, effective Sunday, to cover increased costs for customer service and for enhancing its phone network to handle services such as new calling programs and Internet access. MCI had also filed with the Federal Communications Commission to boost rates 4.9%, also on Sunday, a spokesman said Friday.

Sprint Corp. raised rates by 2% earlier this month, also in an FCC filing.

The moves come as the long-distance carriers prepare for competition from deep-pocketed regional Bells in the $70-billion-a-year U.S. long-distance market, and try to stave off smaller competitors.


“It’s an opportunity to pad margins a bit,” said Brian Adamik, a telecommunications analyst at the Yankee Group, a Boston research firm. “Carriers are bulking up before a possible price war” when the long-distance market has more and bigger companies involved.

Adamik says he expects long- distance rates to rise 10% to 15% before the Baby Bells get into the market, which may not happen until 1998.

AT&T;'s rate increase could raise the average phone bill of a customer by 60 cents a month, the company said Wednesday.

AT&T; shares rose 25 cents to close at $39.25. MCI rose 25 cents to $30.50 and Sprint rose 25 cents to $41.875.

The rate increases, the largest in recent years, will mainly affect customers who aren’t already on an AT&T; or MCI discount-calling program. They also come at the start of the busiest calling season--the weeks between Thanksgiving and New Year’s Day.

AT&T;'s rate hike actually follows that of MCI, which filed with the FCC for its increase on Nov. 1 without announcing it publicly.

Analysts said AT&T; and MCI can get away with the price increases because many of their customers, who are charged basic rates, don’t examine their bills as closely as those who choose discount plans, and are the ones least likely to switch long-distance carriers.