MCI
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- For other uses, see MCI (disambiguation).
Template:Infobox Company MCI, Inc. Template:Nasdaq, is an American telecommunications company headquartered in Ashburn, Virginia. The corporation is the result of the merger of WorldCom (formerly known as LDDS) and MCI Communications, and used the name MCI WorldCom before taking its current name on April 14, 2003 as part of the corporation's emergence from bankruptcy.
MCI's history, combined with the histories of companies it has acquired, echoes most of the trends that have swept American telecommunications in the past half-century: It was instrumental in pushing legal and regulatory changes that led to the breakup of the AT&T monopoly that dominated American telephony; its purchase by WorldCom and subsequent bankruptcy in the face of accounting scandals was symptomatic of the Internet excesses of the late 1990s. It has accepted a proposed purchase by Verizon for US$7.6 billion, but is also in talks with Qwest, who has made a competing offer. This is the latest part of a consolidation trend that many say marks the end of the post-monopoly telecom era.
For a time, WorldCom (WCOM) was the United States' second largest long distance phone company (AT&T was the largest). WorldCom grew largely by acquiring other telecommunications companies, most notably MCI Communications. It also owned the Tier 1 ISP UUNET, a major part of the Internet backbone. It was based in Clinton, Mississippi before moving to its present corporate headquarters.
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History
Corporate founding
The company began in Jackson, Mississippi as Long Distance Discount Services, Inc. (LDDS) in 1983. In 1985 the company selected Bernard Ebbers to be its CEO. The company went public in August 1989 when it merged with Advantage Companies Inc. The company name was changed to WorldCom in 1995.
The company grew through a series of acquisitions. Among the companies that were bought or merged with WorldCom were Advanced Communications Corp. (1992), Metromedia Communication Corp.(1993), Reurgens Communications Group(1993), IDB Communications Group, Inc (1994), Williams Technology Group, Inc. (1995), and MFS Communications Company (1996). The acquisition of MFS included UUNet Technologies, Inc., which had been acquired by MFS shortly before the merger with WorldCom. The acquisition of Digex (DIGX) in June 2001.
MCI acquisition
Mci-Worldcom_logo.GIF
On November 10, 1997, WorldCom and MCI Communications announced their US$37 billion merger to form MCI WorldCom, making it the largest merger in US history. On September 15, 1998 the new company, MCI WorldCom, opened for business.
Sprint merger
On October 5, 1999 Sprint Corporation and MCI WorldCom announced a $129 Billion dollar merger agreement between the two companies. The deal would have been the largest corporate merger in history up to that time. The new company was to have been WorldCom and would have been the largest communications company in the United States. The merger would have put AT&T in the number two spot of the largest communications companies in the US for the first time in history. However the deal did not go through because of pressure from the US Department of Justice and the EU on concerns of it creating a monopoly. On July 13, 2000. the Board of Directors of both companies acted to terminate the merger. Later, in 2000, MCI WorldCom renamed itself WorldCom without Sprint being part of the company.
Bankruptcy
In June 2002, an internal audit discovered that US$3.8 billion had been 'miscounted.' The US Securities and Exchange Commission launched an investigation into these matters on June 26, 2002. (See accounting scandals.)
On July 21 2002, WorldCom filed for Chapter 11 bankruptcy protection in the largest such filing in United States history. Its CEO and founder, Bernard Ebbers, came under fire for his failure to prevent the bankruptcy.
In August 2002, an additional $3.3 billion in improper accounting since 1999 was announced. By the end of 2003, it was estimated that the company's assets had been inflated by around $12 billion.
In May, 2003, the company was given a no-bid contract by the United States Department of Defense to build a cellular telephone network in Iraq. The deal has been criticized by competitors and others who cite the company's lack of experience in the area. [1] (http://seattlepi.nwsource.com/business/123016_worldcomiraq22.html)
The company emerged from Chapter 11 bankruptcy in 2004 with a new name, MCI, and about $5.7 billion in debt and $6 billion in cash. About half of the cash was intended to pay various claims and settlements. Previous bondholders ended up being paid 35.7 cents on the dollar, in bonds and stock in the new MCI company. The previous stockholders' stock was valueless.
Under the bankruptcy reorganization agreement, the company paid $750 million to the SEC in cash and stock in the new MCI, which was intended to be paid to wronged investors.
Post-bankruptcy
WorldCom changed its name to MCI, and moved the corporate headquarters from Mississippi to Virginia, on April 14, 2003. It has yet to pay many of its creditors, who have waited for 2 years for a portion of monies owed. Many of the small creditors include former employees, primarily those who were laid off in June 2002 and whose severance and benefits were withheld when WCOM filed for bankruptcy. A group of some of these employees have formed the exWorldCom5100 group (http://www.exworldcom5100.com).
On February 14, 2005, Verizon agreed to acquire MCI, formerly WorldCom, after SBC Communications agreed to acquire AT&T just a few weeks earlier. The MCI/Verizon merger has been put on hold until March 17, 2005 so that they can evaluate an offer from Qwest, who has made an offer that is potentially worth more. MCI accepted Verizon's initial bid, although it had a lower cash value, because of their perceived financial stability in comparison to Qwest’s, but holders of 26% of MCI stock have requested that they evaluate the merits of both offers before making a final decision.
On March 15, 2005 Bernard Ebbers was found guilty of all charges and convicted on fraud, conspiracy and filing false documents with regulators — all related to the $11 billion accounting scandal at the telecommunications company he founded. He faces up to 85 years in prison. Other former WorldCom officials facing criminal penalties in relation to the company's financial misstatements include former CFO Scott Sullivan (entered a guilty plea on March 2, 2004 to one count each of securities fraud, conspiracy to commit securities fraud, and filing false statements [2] (http://money.cnn.com/2004/03/02/technology/ebbers/)), former controller David Myers (pleaded guilty to securities fraud, conspiracy to commit securities fraud, and filing false statements on September 27, 2002 [3] (http://www.accountancyage.com/news/it/1135463)), former accounting director Buford Yates (pleaded guilty to conspiracy and fraud charges on October 7, 2002 [4] (http://www.usatoday.com/money/industries/telecom/2002-10-07-yates-plea_x.htm)), and former accounting managers Betty Vinson and Troy Normand (both pleading guilty to conspiracy and securities fraud on October 10, 2002 [5] (http://www.cbsnews.com/stories/2002/11/05/national/main528148.shtml)).
In March of 2005, 16 of WorldCom's 17 former underwriters reached settlements with the investors ([6] (http://quote.bloomberg.com/apps/news?pid=10000103&sid=auybDoZIEQTg&refer=news_index)). Citigroup settled for $2.65 billion on May 10, 2004 ([7] (http://www.citigroup.com/citigroup/press/2004/040510a.htm)).
Competitors
See also
References
- Template:Book reference
- First Interim Report of Dick Thornburgh, Bankruptcy Court Examiner (http://news.corporate.findlaw.com/hdocs/docs/worldcom/thornburgh1strpt.pdf), United States Bankruptcy Court for the Southern District of New York (http://sbny.uscourts.gov), In re WorldCom, Inc., Case No. 02-15533 (AJG) (November 4, 2002)
External links
- Corporate website (http://www.mci.com/)
Credit risk
- Moody's KMV Default Case Studies (http://www.moodyskmv.com/research/UAL.html)
Third party
- Website by former WorldCom employees seeking full severance pay and benefits (http://www.exworldcom5100.com/)
- HavenWorks' WorldCom News (http://www.HavenWorks.com/business/research/worldcom)
- Forbes article on WorldCom scandal (http://www.forbes.com/home/2002/06/26/0626topnews.html)
- BBC News - WorldCom files for bankruptcy (http://news.bbc.co.uk/hi/english/business/newsid_2143000/2143217.stm)
- Analyst Coached WorldCom Chief on His Script (http://www.nytimes.com/2003/02/27/business/27TELE.html), The New York Times, February 27, 2003
- CFO Magazine, April 21, 2004, "MCI Emerges from Bankruptcy" (http://www.cfo.com/article/1,5309,13378%7C%7CT%7C1161,00.html?f=TodayInFinance_Inside)fr:WorldCom