August 24, 1998

	Sign In Sign-Up

August 24, 1998

Phone companies 'fess up to feds about 2000 bug

BellSouth says it will finish testing by end of year

------------------------------------------------------------------------

Andy Peters Staff Writer

Phone companies are releasing detailed information for the first time on their progress in dealing with the year 2000 (Y2K) computer conversion.

The good news for Atlanta is that BellSouth Corp. says it is ahead of the game.

The Atlanta-based telecommunications giant will probably spend between $100 million and $200 million on Y2K compliance. That amount could rise, however. BellSouth expects to complete testing of individual systems by the end of the year, and will test to see that the systems work together by the middle of next year.

"BellSouth is one of the leaders in the pack in getting Y2K work done," said Al Jacobsen, executive director of Omicron Atlanta's Year 2000 Work Group, which assists companies with computer problems related to the impending millennium. The Y2K bug refers to the possibility that some computers may fail to understand a year as four digits, and read "2000" as "1900."

Other phone companies that serve Atlanta report that they also are making progress.

The sneak peek inside phone companies' Y2K projects is delivered thanks to federal officials in Washington, D.C. The Securities and Exchange Commission (SEC) recently issued an order that all publicly traded corporations must be forthright in talking about Y2K. Previously, many companies' quarterly reports to the SEC were vague about Y2K projects.

AT&T Corp., which serves long-distance, local and wireless phone customers in metro Atlanta, will spend $300 million this year on Y2K, according to Dave Johnson, an AT&T spokesperson. AT&T formed its Y2K task force in early 1996 and plans to devote all of 1999 to testing its systems for Y2K compliance.

"We do not see year 2000 compliance as a problem," Johnson said. "The year 2000 will be transparent with our customers."

Telling the story

BellSouth (NYSE: BLS) intends to improve its effort of keeping the public abreast of its Y2K efforts. Within the next month, BellSouth plans to begin regularly updating its Web site (http://www.bellsouth.com) on the company's progress on Y2K, in terms of the percentage of work completed, said Clay Owen, a spokesperson for BellSouth.

That is something BellSouth hasn't done previously; BellSouth's current site has Y2K-related information that is about 2 years old.

BellSouth is putting time and money into making sure its buildings' elevators work and its billing systems don't shut down, but the main focus of its Y2K efforts will be on its switching and other telephone network equipment.

"Obviously, we want to make sure people can call on Jan 1, 2000," Owen said.

BellSouth does appear to be spending less on Y2K than its Baby Bell siblings. Bell Atlantic Corp., which covers the Northeast, will likely spend between $200 million and $300 million, while San Antonio, Texas-based SBC Communications Inc. will spend about $250 million.

What they're doing

Here is a look at Y2K projects of other telecom companies with a large Atlanta presence, according to filings with the SEC:

• MCI Communications Corp. (Nasdaq: MCIC) will spend about $400 million this year and next year.

• Sprint Corp. (NYSE: FON) is budgeting about $200 million for Y2K.

• ITC^DeltaCom Inc. (Nasdaq: ITCD), a long-distance company based in West Point, predicts it will spend less than $2 million on Y2K.

• AirTouch Communications Inc. (NYSE: ATI), the wireless phone provider, said it will spend about $75 million on Y2K and doesn't expect disruptions in service.

• USCI Inc. (Nasdaq: USCM), an Atlanta-based reseller of cell phone service under the Ameritel brand, does not expect to make a "significant financial expenditure" on Y2K. However, USCI is concerned that other companies it relies on may not be ready, which could cause a "material adverse effect on [USCI's] ... financial condition," according to an Aug. 13 filing.

• Premiere Technologies Inc. (Nasdaq: PTEK) is in a situation similar to that of USCI. Premiere, maker of the WorldLink calling card, relies on other companies to transmit its calls. If those companies don't get ready for Y2K, that failure could have a "material adverse impact" on Premiere's revenue, according to a May 15 filing.

For all the bellyaching in SEC documents, many companies aren't in deep trouble, said Paul Arne, an attorney with Morris, Manning & Martin LLP. The SEC is requiring companies to disclose their "most reasonably likely worst case scenarios."

"Because of this new SEC guidance, public companies are being encouraged to paint bleak pictures of worst-case scenarios," Arne said.

Although telecom corporations are now being more specific on their Y2K efforts, Jacobsen warns that their budget predictions may fall a little short of the real amounts. Many times, companies don't count in their Y2K budgets any costs associated with replacing systems that need replacing, but also had not been Y2K compliant.

"The real numbers are probably a larger number than the companies are reporting," he said.