A Business story yesterday incorrectly stated where MCI Communications Corp. stock trades. It is listed on the NASDAQ computer system on the over-the-counter market. (Published 8/23/90)

MCI Communications Corp., the world's second-largest long-distance phone company, announced yesterday it would take a $500 million charge against future profits in a move to send some of its aging telecommunications equipment into early retirement and accelerate conversion to new digital technology.

The so-called write-down, which the company said it may undertake as early as the current quarter, affects mostly the book value of MCI's physical facilities, although it will depress earnings for the Washington-based company over the short term. Moody's Investors Service Inc. said it should not impair the company's competitiveness or operations.

Analysts called it a "positive" step toward a more realistic assessment of MCI assets. That move, coupled with MCI's acceleration of a $1.1 billion investment plan to convert to digital technology by the end of 1991 drew praise.

"It clearly strengthens their position," said Gregory Cline, program manager of the telecommunications consulting firm IDC Washington Inc. The new technology "is very, very expensive," Cline said, "but it will be worth it in the long run because they are banking on the digital technology and the advanced services they can provide users over it."

"AT&T wrote down their {older} analog plants a year and a half ago" for $6.7 billion, said Michel Guite, vice president of Salomon Brothers in New York. "MCI has followed in those same steps. The outcome is that the migration to all-digital plants that MCI had estimated to go to by 1993 will be accelerated to 1991."

Investors seemed supportive. MCI stock dropped $2.25 on first news of the write-off, but recovered some to close down $1.12 1/2 to $33.62 1/2 on the broadly lower New York Stock Exchange.

The move makes MCI the last of the top three long-distance companies, which include American Telephone & Telegraph Co. and US Sprint Communications Co., to announce conversion to digital equipment, away from older analog switching and transmission technology.

Gene Gabbard, MCI executive vice president and chief financial officer, said the decision stemmed from a couple of factors.

First, MCI last week obtained 3,000 additional miles of fiber optic transmission wires in the completion of a $1.25 billion acquisition of the nation's fourth-largest telephone company, TelecomUSA Inc.

MCI also announced yesterday that it had renegotiated on favorable terms contracts with Tulsa-based Williams Telecommunications Group, from which it had been purchasing $60 million to $80 million worth of access to fiber optic lines a year, analysts said.

Such lines are key components of digital systems. As opposed to analog systems, which typically transmit voice communications via electrical currents over copper wire networks, digital technology converts voice and data into numerical code that is easily processed by computer equipment. When these signals are transmitted over fiber optic cable through high-speed pulses of light, the volume of information transmitted can increase tremendously.

Since the mid-1980s, communications companies have seized on that technology as a more efficient, cost-effective, flexible and powerful alternative to analog technology.

Industry observers yesterday predicted continued transition to digital communications for its advantages of increased clarity, redundancy and capacity of signal transmission.