NTC Makes Bid For Survival

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Plagued in the past year by a sharp downturn in revenue, a stream of lawsuits that have yielded the payment of settlements valued at some $9 million and a faltered deal that promised new ownership, National Telephone & Communications Inc. is making a bid for survival with operational changes and a plea to the federal government.

The direct marketing services group that is a wholly owned subsidiary of Incomnet Inc., Woodland Hills, CA, markets long distance residential and commercial telecommunications services through a network of independent representatives and through a limited level of outbound telemarketing programs.

For the fourth quarter ended December 31, 1997 Incomnet posted a 20 percent decline in revenues, to $25.8 million and a net loss of $6.4 million, compared to a net loss of $29.1 million for the same period a year ago. First quarter results for 1998 have not been posted. For the year ended 1998, Incoment posted a net loss of $13.6 million, compared to a net loss of $37.7 million a year ago, on revenues that jumped 17 percent, to $125.1 million.

Although the declines slowed, Incomnet attributed much of the poor performance to NTC. Citing a "substantial decline in the number of its independent sale representatives customer and revenues," Incomnet announced plans to sell off NTC in March. However, a bid by NTC Acquisition Inc., a Minneapolis-based firmed set up to purchase the assets and outstanding shares of NTC, fell through. Plans called for the renaming of the entity to Nextcom Worldwide Communications Inc.

Early last month the potential sale was axed because "the purchaser's required modifications to the agreement...were not acceptable," according to company documents. Now, the company is forging ahead with plans to develop a recapitalization plan and to rebuild its customer base that has seen rapid erosion.

Additionally, NTC has made an emergency petition for partial waivers to the Federal Communications Commission for payment of universal service contributions, a payment made based on revenues. The company claims "the financial crisis stemming from NTC's USF payment imbalance has become critical for NTC, not only putting it at an increasingly sever competitive disadvantage but threatening the company's viability," according to the plea.

Further the company has posted operating losses of $4.5 million from October 1997, through May 1998. Also, the company defaulted on a contract with WorldCom on a commitment to purchase a designated volume of telephone time. As of April, the company was in default for approximately $2 million for services and has a $4.3 million shortfall through Febraury.

In an effort to address its less-than-stellar position, the company recently pulled its outserviced call center responsibilities from TeleSpectrum Worldwide Inc.,, reduced the hours of operation for its 24-hour customer service operation, reduced customer service agents at its central call center facility and added an automated voice log verification system for new customers as part of California regulations. "We have been adjusting our overhead to meet our current business needs," said Debbie Chuckas, senior vice president, marketing, National Telephone & Communications Inc.

"We adjusted staffing levels to suit consumer needs. We feel strongly about going back to 24 hours but right now we are automating a lot of our services to be able to refill calling cards and pay bills on an automated system."

The automated verification system is a California mandate designed to provide consumers with time to re-think a change in their local and long-distance telecommunications carriers. The program aims to reduce a long-standing telecommunications practice known as slamming - in which telecommunications companies switch carriers to unwitting customers.

NTC implemented a fully automated voice activated system that provides consumer verification information through a toll-free number and a seven-language menu option. "The system is fully automated and places the call back and confirms the information through the voice recording," Chuckas said.

The marketing executive said despite the operational cost cutting measures, NTC is trying to balance those measures with retaining existing customers.

"We also do outbound calls with our Win Back program make calls to find out why they left us and we are able to turn them back quite effective for us. We've actually been doing that for a few months. We have been looking at Win Back to include in various avenues to acquire new customers," she said.

Additionally, the company is looking to expand its commercial business support by expanding the number of agents. "We have four agents, but that fluctuates. We are looking at expanding that and going after direct sales agents and that would require expanding into more dedicated service."

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