For the third quarter ending September 30 the number-two US long-distance company posted a net loss of $3.4 billion, up from a net loss of $55 million for its predecessor company WorldCom, which went into chapter 11. Excluding the one-time charge, the company posted a profit of $121 million for the July-September quarter.
Sales fell 15% to $5.08 billion from $5.97 billion, but costs from continuing operations fell 16% to $4.46 billion.
MCI has aggressively sought to cut costs, and has reduced its workforce to 41,000 from 59,000 at the beginning of the year. CEO Michael Capellas revealed the company has now met its targets for staff cuts.
Capellas is continuing MCI’s transition away from traditional long-distance service to residential customers under its MCI brand to an emphasis on providing high-end IP services to big businesses. However, sales in the division that serves global corporate customers only fell 7.8% to $1.19 billion, compared with the 15% drop companywide.
MCI also is achieving some level of success in selling so-called private Internet protocol networks. The networks provide greater security by letting companies link international sites without sending information outside of MCI’s network. MCI operates a network that spans 98,000 miles over six continents.
Revenue in the unit that sells call services for residential homes and small US businesses fell 17% to $2.24 billion. Sales in the unit that sells wholesale access to MCI’s network fell 17% to $1.65 billion.
The write-down of MCI’s telephone network mirrors that of its competitors.
AT&T Corp, the number-one US long-distance provider, recently recorded an $11.4 billion write-down, while the number-three ranked Sprint Corp recorded a $3.5 billion write-down. The companies say regulatory changes and competition from wireless and cable phone providers have hurt profits, making their networks less valuable.
The $3.4 billion write-down by MCI is the second of the year. It already restated three years of financial results back in March, and recorded a $59.8 billion expense for writing down the value of assets, including those obtained in acquisitions.
