WorldCom, MCI Tracking Stocks Will Be Eliminated

WorldCom Inc., the No. 2 U.S. long-distance telephone company, said Tuesday that it will eliminate its WorldCom Group and MCI Group tracking stocks, saving $284million annually by dropping the MCI dividend.

The Clinton, Miss.-based company, which has a new chief executive and is trying to cut its debt, said the widely expected move will be effective July 12.

“By eliminating our tracking stocks we will build on our cash position and simplify our corporate structure, benefiting the investment community,” WorldCom Chief Executive John Sidgmore said.

WorldCom had created the tracking stocks just a year ago, when it wanted to separate its once-booming data business from its sluggish long-distance telephone operations. Tracking stocks reflect just a portion of a company’s business.

Shares of WorldCom Group track its main data and Internet business, while shares of MCI Group reflect its residential long-distance telephone business. Since its creation on June 8, 2001, the MCI tracking stock has lost 89% of its value. The WorldCom Group tracking stock has shed 92%.

“Clearly, the tracking stocks didn’t have the desired effect,” said independent telecommunications analyst Jeffrey Kagan. “Putting the stocks back together again is not going to be a magic bullet. Just the act alone is not going to save them.... But if it’s a first shot in a new strategy that makes sense and that everybody buys into, then it could be the start, but right now it could go either way,” Kagan said.

WorldCom said each outstanding share of MCI Group common stock will be converted into 1.3594 shares of WorldCom Group common stock. Notice of the conversion will be mailed today to MCI group common stockholders of record as of Tuesday.

Dividends on shares of MCI Group common stock will cease to be paid as of the conversion date, the company said. However, holders of record of MCI Group common stock at the close of business June 30 will be paid the previously declared quarterly dividend of 60 cents a share, payable July 15.

When the move is completed, WorldCom will have one class of stock, with the ticker symbol WCOM.

WorldCom is seeking to cut costs as it negotiates $5 billion in bank loans and tries to stave off a cash crunch. Former CEO Bernard Ebbers was recently ousted.

In after-hours trading, WorldCom Group stock rose as much as 7cents to $1.49. In regular trading, before the announcement, the shares fell 7 cents to $1.42.

MCI shares fell 14 cents to $2.05 in regular trading.