Exile Telcos to Island of Misfit Companies

These distressed telco stories play out the same way: The stock goes to the single digits, then the people behind the company make noises that everything will work out. They even talk about putting up more money.

They all claim that if they could just get a little more cash in the door, then everything will be hunky dory. Please! You could put all of the money in the world into these companies and it wouldn't matter. Almost all of them were set up like dot-coms, meaning that they were created to be flipped -- typically to AT&T (T - Cramer's Take - Stockpickr).

But that game ended two years ago. There simply isn't enough business to go around for all of these companies.

Nobody's going to admit that, though. These telcos all act as if they are needed urgently. They all act that if they just cut out their capital expenditures and slim down their operations, they will make it big.

Nothing could be further from the truth. We only need a couple of phone companies in this country to handle the traffic, and we can only support a couple of companies trying to duke it out. In fact, like cereal companies or automakers, there's room for only a few.

Today Goldman Sachs comes out and talks about Level 3's (LVLT - Cramer's Take - Stockpickr) problem clients, and it turns out that its clients are other distressed telco companies. What a joke!

For a year now I've been saying that there will be three phone companies when this era is through: Verizon (VZ - Cramer's Take - Stockpickr), BellSouth (BLS - Cramer's Take - Stockpickr) and SBC Communications (SBC - Cramer's Take - Stockpickr). I am not even including AT&T, Sprint (FON - Cramer's Take - Stockpickr) and WorldCom (WCOM - Cramer's Take - Stockpickr) as survivors. Not after what I have seen this year. If you are not in one of these three winners, you are in losers.

Accept it and move on. You will be richer for it.

Happy Holidays.