A story in yesterday's Business & Finance section gave figures for loans made to Riggs National Bank directors that were incorrectly identified as interest rates on loans. The figures were actually percentages of equity capital accountsrepresented by the loans.
One year and $7.7 million in advertising costs later, MCICommunications Corp. is riding the crest of what appears tobe an extraordinarily successful effort to market its cut-rate long-distance telephone service to residential customers.
When the program, which has featured extensive newspaper and broadcast advertising, began just one year ago, even William McGowan, the company's chairman, says he would not have predicted that this year the service would have landed 225,000 customers. And the only limit on the number of customers the service can attract is based on the system's capacity, which may not be reached until late in the decade, one enthusiastic stock analyst predicted.
"The residential areais an area of great opportunity for MCI," said Harry Rosenthal of Bear Sterns, who predicted MCI would show 60 percent revenue gains for the next several quarters. "It's been super, just super. Basically, what they're getting is incremental revenue gains with very low operating costs."
But McGowan said the success of MCI's residential service marketing program goes beyond the dramatic impact the numbers have hadon MCI's financial picture.
"Instead of a small number of people, there are now tens of millions of people who are now aware of the fact that competition is not only coming in the future, it is here today," McGowan said recently. "All other competitors will benefit from that.
"Now I think the so-called technology revolution is going to happen quickerthan most people envision it will.
The popularity of theMCI residential program -- which along many intercity routes offer rates 50 percent less than those of American Telephone & Telegraph Co. -- also has spurred new interest in investment opportunities in MCI.
In fact, the District-based company recently announced that it had obtained a $200 million, unsecured line of credit from seven large banks, including Washington's Riggs National Bank. "We used to have to putup as security my ties and suits," McGowan said of a company that six years ago could not make a buck.
That credit line and rising revenues will permit MCI to expand its long-distance microwave network beyond the 75 metropolitan areas now served to include several key areas now not available viaMCI, including Florida and the Pacific Northwest.
Even so, in the last year, MCI's network has grown from 70 to 93 metropolitan areas and from 2,500 to 3,500 cities. Of the largest 20 metropolitan areas, only Miami and Seattle are not yet hooked into the MCI system.
In Houston, which has thehighest number of MCI residential subscribers of any city, the company has signed up more than 20,000 customers. Dallas, New York, Los Angeles and Washington round out the top five MCI cities.
The results of the first nine months of the company's fiscal year, which ends on March 31, are just assignificant. The company has reported sales of $162.4 million for that period compared with $100.9 million for the previous fiscal year.
Profits, limited by the marketing and other start-up costs associated with the new program, rose from $8.1 million for the first nine months of fiscal 1979 to$13.2 million this year. If revenues continue at their current pace, they will reach more than $300 million in the next fiscal year.
McGowan says that beginning with the company's next quarter, the revenues from the residential service, which are about $6 million for the year, will begin to show themselves in the profit column.
The availablity of capital from revenues and the line of credit even ignores the fact that AT&T's appeal of MCI's $1.8 billion jury award in last year's antitrust suit will be heard this spring. The pending Supreme Court decision, which could lead to a giant award to MCI, is expected in the fall.
But by the end of the month, MCI will complete another type of major move, shifting its headquarters from 17th Street NW to a location on 19th Street NW between L and M streets. The facility ultimately will house 450 MCI employes and will consolidate company operations in five other sites in the District and suburban Virginia.