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Third-Quarter Loss $3.4 Billion for MCI

$3.5 Billion Write-Down Hurts Results

By Yuki Noguchi
Washington Post Staff Writer
Friday, November 5, 2004; Page E05

MCI Inc. yesterday reported a loss of $3.4 billion during its third quarter, reflecting its recent decision to write down the value of its telecommunications network.

The Ashburn company last month took a one-time, $3.5 billion pretax write-down to reflect the rapid decline of its consumer phone business. Like rivals AT&T Corp. and Sprint Corp., MCI has pulled back from residential phone service after losing customers to regional phone giants such as Verizon Communications Inc. and SBC Communications Inc., which have been freed by regulators to enter the long-distance business.

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MCI Inc.
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WorldCom Q&A
WorldCom History
_____MCI Coverage_____
Keeping Internet Phone Service Simple (The Washington Post, Nov 8, 2004)
Citigroup Liable In WorldCom Worker's Loss (The Washington Post, Nov 4, 2004)
Bear Stearns Analysts Had WorldCom Doubts (The Washington Post, Nov 3, 2004)
Story Archive and Company Background

MCI's net loss, which amounted to $10.65 a share, widened from $55 million a year earlier, when the company's stock did not trade because the former WorldCom was in Chapter 11 bankruptcy reorganization. Revenue fell to $5.08 billion during the quarter ended Sept. 30, from $5.97 billion a year earlier. General, administrative and sales costs dropped 24 percent from third-quarter 2003.

MCI has reduced its expenses in part by cutting 13,600 jobs this year. The company now employs about 41,000 people.

During the first nine months of the year, MCI lost $3.86 billion on revenue of $15.7 billion, compared with a $5 million profit on revenue of $18.7 billion in the 2003 period.

As prices have fallen for telecommunications services, the company's revenue has been pushed down, but MCI officials said that trend is starting to stabilize, especially among corporate customers. They said the company expects to generate a profit this quarter for the first time since MCI exited bankruptcy proceedings in April.

"While we recognize the economics of this business will remain challenging, we do believe the technology is moving in a direction that is uniquely suited to our capabilities," said Michael D. Capellas, the company's chief executive.

The company plans to focus on large business and government customers, as well as customers that use secure, private data networks, he said. MCI also wants to reduce its costs by carrying most of its traffic on its own network.

"There's still growth, but the price is falling faster, so the industry is shrinking," said Susan Kalla, an analyst with Friedman, Billings, Ramsey & Co.

MCI had $5.59 billion in cash at the end of September, down from $6.18 billion at the end of last year. Shares of MCI closed up 51 cents yesterday at $17.76 a share.


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