The ratings on Los Angeles-based U.S. TelePacific Holdings Corp. reflect a vulnerable business risk profile due to significant competition from larger, better-capitalized telecom operators and other competitive local exchange carriers (CLECs); integration risks associated with the Mpower acquisition; the lack of any sustainable competitive advantages; low barriers to entry; vulnerability to potential regulatory changes; and a lack of geographic diversity. The CLEC industry has a high degree of business risk, characterized by intense competition, price compression, and technology shifts. TelePacific competes with Verizon Communications Inc. and AT&T Inc. in California and Embarq Corp. in Nevada, as well as with other CLECs. While TelePacific has demonstrated success in growing its client base both organically and through acquisitions by providing excellent customer
