Declining revenues were offset by lower restructuring costs at MCI, the long-distance phone company that is second only to AT&T in the US.
MCI days ago turned down Qwest Communications International Inc’s $9.6bn offer in favor of Verizon. At the time, MCI cited its corporate customers’ preference for a Verizon merger.
During an earnings conference call yesterday, MCI executives did not discuss the protracted and seemingly bitter bidding war. CFO Robert Blakely said MCI hopes its shareholders will vote on the deal this summer.
MCI posted a $2m loss, or 1 cent a share, versus a $388m loss, or $1.19 per share, a year ago. Operating expenses fell sharply due to its major corporate overhaul last year, before it emerged from bankruptcy protection in April 2004.
MCI, which was formerly known WorldCom, cut 16,600 jobs last year. Product, services and administrative costs dropped 16% to $4.3bn, while depreciation and amortization costs fell 37% to $328m versus $521m.
However, revenue also fell, by 12%, to $4.8bn as the company pulled back from consumer services, following a number of unfavorable regulatory rulings. MCI’s enterprise unit, which serves about 60,000 large business customers, saw its smallest decline, a 3% drop to $1.2bn from a year ago.
Its mass-market segment, which includes its residential long-distance phone customers, fell 18% to $1.1.bn. The company said it sees little opportunity for future profit in this segment and will not actively pursue it.
Focusing on our IP leadership strategy, you will see us accelerate our push into network security, managed network services and hosting, better positioning us in the industry’s highest growth segments, said MCI chief executive Michael Capellas.
Continued price pressure among its corporate customers, due to new contract renewals, has drove revenues lower. Company executives said prices in general were holding steady, following the industry’s pricing wars for large-customer services last year.
Also, the company’s tax expenses surged to $119m from $24m a year ago. MCI still faces more than $1.5bn worth of back-tax claims by than a dozen US states relating to its former WorldCom operations. Blakely said MCI added $104m to its tax contingency estimates.
For the full year, the company maintained its revenue guidance of between $18bn and $19bn, or a 10% to 14% decrease from 2004, within the analysts’ range. Excluding merger-related costs, it expects operating profit before depreciation and amortization of $1.8bn to $2bn. MCI boosted its capital expenditure intentions for the year to between $1.2bn and $1.3bn, from previous guidance of $1bn.
