MCI Loss Narrows on Lower Expenses
MCI Inc., which agreed this week to be acquired by Verizon Communications Inc., reported a much narrower first-quarter loss Thursday because of lower operating costs.
Shares in the long-distance phone company rose 21 cents to $25.50 on Nasdaq, below the price of at least $26 that Verizon had agreed to pay.
The company reported that it lost $2 million, or 1 cent a share, for the three months that ended March 31, compared with a loss of $388 million, or $1.19, a year earlier. Losses from continuing operations totaled $91 million, or 28 cents a share, compared with $386 million, or $1.18.
Revenue fell 11.6% to $4.79 billion.
The company said operating expenses fell sharply compared with a year earlier, when MCI incurred significant costs related to its reorganization.
MCI said it continued to expect 2005 revenue of $18 billion to $19 billion, in line with analysts’ consensus estimate of $18.26 billion.
MCI revenue has dropped from $24.3 billion in 2003 to $20.7 billion in 2004 because of intense competition in the telecommunications industry.
The company saw its smallest revenue decrease in its enterprise segment, which serves large corporate and government customers. Revenue dropped 3% from the year-earlier quarter in this segment to $1.16 billion.
Ashburn, Va.-based MCI’s roster of major corporate clients was cited as a big reason that Verizon and rival Qwest Communications International Inc. were pursuing the company.
MCI this week accepted an $8.5-billion buyout offer from Verizon that was 13% below the $9.75 billion offered by Qwest. MCI said it was worried about Qwest’s high debt level.
During a conference call with analysts Thursday, MCI executives made only passing comments about the decision to merge with Verizon. Chief Financial Officer Robert Blakely said the company hoped to hold a shareholder vote on the deal this summer and that the Verizon deal was “in the best interests of shareholders, employees and customers.”
Also Thursday, Verizon Chairman and Chief Executive Ivan Seidenberg said he did not expect any other companies to bid for MCI.
But Qwest’s CFO, Oren Shaffer, did not rule out some further action toward MCI in comments to an investor conference Thursday. Several large MCI shareholders repeatedly supported Qwest’s bids over Verizon’s offers, and a couple have said Qwest could pursue a proxy fight for MCI.
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Associated Press and Reuters were used in compiling this report.
