Judge approves MCI reorganisation plan

MCI should emerge from Chapter 11 bankruptcy protection early next year, company executives said, after a US judge approved the...

MCI should emerge from Chapter 11 bankruptcy protection early next year, company executives said, after a US judge approved the carrier's reorganisation plan.

MCI declared bankruptcy last July even as it continued to disclose a string of accounting irregularities which added up to $11bn (£6.5bn).

Since then the company has brought in new members for its board of directors and hired several top executives, including chairman and chief executive officer Michael Capellas.

The company, still legally called WorldCom, will change its name to MCI when it emerges from bankruptcy.

The company expects to have $2.3bn (£1.4bn) cash and a net debt of $3.5bn (£2.1bn) at the time it emerges from bankruptcy, said Robert Blakely, executive vice-president and chief financial officer.

MCI will be heading into tough industry conditions, although it does see enterprises growing interested in new projects, such as voice portals.

At the same time, "there's no question that we are in a particularly brutal pricing environment", Capellas said.

The bankruptcy process has constrained MCI in raising money, making acquisitions, expanding its coverage area and even making capital investments, said Frank Dzubeck, president of consulting company Communications Network Architects.

Every move had to be met with the court's approval, so MCI has had to be conservative at the risk of delaying its emergence from bankruptcy.

However, the process has also delivered benefits.

MCI will emerge virtually debt free and has been able to accelerate depreciation of its network equipment.

Competitors such as AT&T and Verizon Communications still carry heavy debt burdens and have to depreciate their gear on a schedule defined by the FCC. That could give MCI an edge, Dzubeck added.

"A company like MCI can reduce its prices by 50% or 60% and still make a profit," Dzubeck said. For users of telecommunications services, the competition should mean better prices.

Stephen Lawson writes for IDG News Service

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