Phone losses curb WorldCom Q4 earnings

By George A. Chidi, Jr., IDG News Service |  Networking

WorldCom Inc.'s Chief Executive Officer Bernard Ebbers came out swinging on a conference call with investors following the company's release of fourth quarter and annual financial reports Thursday morning, trying to dispel market rumors of the company's financial troubles.

The WorldCom group -- composed of the company's Internet services businesses -- reported net income of US$384 million or $0.13 per share in the fourth quarter, excluding effects of the company's merger with Intermedia Communications Inc. and Digex Inc. and other one-time items. The results compare to net income of $585 million or $0.20 cents per share for the year-earlier quarter. Analysts polled by Thomson Financial/First Call had expected $0.14 cents per share profit for the fourth quarter in 2001.

Revenue for the quarter was $5.3 billion. Discounting the effect of the company's merger with Intermedia and Digex, and including the deconsolidation of its investment in South American telecom provider Embratel Participacoes SA, the company had pro forma revenue of $4.7 billion, growth of 8.5 percent over the $4.3 billion in the same quarter a year earlier.

Ebbers dismissed the prospects of WorldCom's debt being downgraded below investment grade status, as well as the possibility of the company leaving the S&P 500 company list.

"To question WorldCom's viability is utter nonsense," Ebbers said.

WorldCom highlighted the 23 percent revenue growth from international operations and 13 percent revenue growth from data and Internet operations. Like other long-distance companies, WorldCom's voice revenue continues to decline, down 8 percent from the year-ago period.

WorldCom's MCI group -- the long-distance and consumer services division spun out as a tracking stock -- had declining revenue in almost every field for the fourth quarter. Its $3.2 billion is a decline of 16 percent year-over-year, with consumer revenue down 9 percent, wholesale revenue down 19 percent, alternative channels and small business revenue down 29 percent, and dial-up
Internet revenue down by 15 percent.

The MCI group's reported net loss was $89 million, or $0.75 per share for the quarter, compared to $125 million, or $0.04 a share for the year-earlier quarter. The company expects revenue declines for the division to be in the mid-teens for the first half of the year, and over 20 percent in the latter half.

The company projected consolidated net income for 2002 -- for the WorldCom Internet group and the company's MCI phone unit together -- in the $0.75 to $0.80 per share range, presuming no economic recovery at all for the year. This compares with consolidated earnings of $1.01 per share for 2001. The consolidated earnings figures exclude one-time items.

It's been a tough year for WorldCom, and it has taken a toll on its executive's finances, leaving some investors grumbling about management's priorities.

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