MCI celebrates emergence from bankruptcy

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MCI celebrates emergence from bankruptcy

MCI has emerged from bankruptcy and is beginning to distribute securities and cash to its creditors.

The company's plan of reorganisation, confirmed last October, is now effective. MCI, formerly known as WorldCom, filed for bankruptcy in July 2002, with debts of $32.8bn, but was able to continue operating under Chapter 11 of the US Bankruptcy Code.

MCI is confident it will be able to capitalise on new trends in the telecommunications industry, using its global network in 150 countries on six continents. The company has retained all of its largest corporate customers and has signed many new accounts.

With a large IP infrastructure in place, MCI can package traditional telephony with IP-based services, and it can compete effectively in an increasingly competitive enterprise telecoms market, said MCI president and chief executive officer Michael Capellas.

MCI will roll out new products and services in the next few weeks and months, and will announce several new partnerships. The company will focus on expanding globally, offering managed services and offering new IP-based telecom products, among other things.

The company leaves bankruptcy with about $6bn in cash and about $5.5bn in debt. It posted a $145m net loss in December, compared with a $21m net loss in November. Its cash balance at the end of December was $5.6bn.

The past two years were filled with "unbelievable challenges", Capellas said. He praised MCI's employees for helping the company through the bankruptcy after the company in mid-2002 disclosed that a group of former employees had altered accounting records to conceal losses and inflate earnings.

Among the obstacles was a suspension from MCI receiving U.S. government contracts from August 2003 to January. MCI took the suspension seriously and worked hard to win back the business, Capellas said. "We exceeded everything they asked us to do," he added. "We did everything the right way."

Jeff Kagan, an independent telecom analyst, said, "So much of a company's success is dependent on the human need for achievement and acceptance and winning. Emerging from bankruptcy will make an enormous positive impact in the minds and hearts of workers and customers."

Among MCI's challenges will be continuing to focus on ethics and to respond to the rapidly changing telecom marketplace, Kagan added.

MCI's advantage is that it is a large competitive local exchange carrier moving toward voice over IP offerings, he said. With IP voice services, MCI can avoid leasing lines from the incumbent carriers in the future.

Grant Gross and Gillian Law write for IDG News Service

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