There is one massive consolation for shareholders in MCI Communications Corp as they stare, open-mouthed, at the company’s third quarter results. Although the company reported operating earnings of $0.19 cents a share, one cent higher than Wall Street expected, it also made a net loss of $182m, or 26 cents a share, against a profit of $304m last time. The quarter included a $515m charge for restructuring and other items. Revenues at the long-distance carrier only nudged up by 2.9% to $4.82bn. The consolation for the shareholders comes from the fact that although the company is now spending their money to buy market share – especially in the protected local markets, pretty soon, with WorldCom Inc, GTE Corp and British Telecommunications Plc all lined up as potential takeover partners, it will be someone else’s. According to MCI, the highlight of the quarter was it efforts in its non-core markets as it attempts to move into the US local distance market. During the quarter, MCI reported a 100% increase in local services revenue, a 27% rise in information technology revenues and double-digit growth in revenue from business users. But most of MCI’s revenue came from long distance sales, which totaled $4.3bn for the quarter. Clearly, the company is offering bargains which users cannot resist but margins have been hammered as a result and the cost of services, as proportion of revenue, is up from 50% to 63% compared with a year ago. Normal business rules have ceased to apply in the current state of US telecoms and MCI chief executive Gerald Taylor says: The recent unsolicited merger proposals from WorldCom and GT underscore the attractiveness of MCI’s assets and its strategy for continued profitable growth. MCI’s core long distance business saw traffic up 6% in the quarter, but revenue did not keep pace as it was hampered by continuing rate decreases and a restructuring of its carrier business. Its business services unit posted, data services up 60% and internet revenue gaining 80%. MCI said wireless revenue was $80m, down from $83m a year ago. Internationally, revenue for MCI’s Concert venture with British Telecom was up $200m from $160m last year, a 25% gain. The joint MCI-BT venture now has more than 3,400 corporate customers and $2bn in revenue under contract.
