July 08, 2002, 11:18 AM — IDT Corp. officials Friday detailed their bid to buy WorldCom Inc. local phone offerings for businesses and MCI Communications Corp. dialup services and offered backup telecommunications plans for customers of those units. A WorldCom spokeswoman, however, said the company was not in negotiations with IDT and does not plan to sell off core businesses.
IDT officials speaking on a conference call Friday said they are offering three years free cash flow of the businesses that would be acquired, forecast to be about US$5 billion. Free cash flow typically is considered to be the cash a company generates from operations, minus what is needed to maintain the operations. The businesses IDT is offering to acquire include local telecom services mainly composed of the assets of MFS Communications Co. Inc., which WorldCom purchased in 1996. Other WorldCom businesses included in the IDT offer are Brooks Fiber Properties Inc., and MCI small business customers for dialup long-distance service.
IDT's offer does not include WorldCom's UUNet Technologies Inc. Internet network assets, nor the MCI enterprise customer businesses. IDT's interest in the WorldCom assets was first made public a week ago in a report posted online by the Wall Street Journal, and since then IDT has briefed various media outlets on details of its plans.
The IDT offer, company officials said Friday, would comprise an initial payment of $800 million in IDT stock, upon the closing of the deal, with the rest being paid in cash installments during a three-year period. Conservative estimates of the free cash flow from the units during the three year period are $5 billion, but it could end up being more, IDT officials said.
WorldCom last week revealed accounting irregularities that caused the company to overstate earnings by nearly US$4 billion. The U.S. Securities and Exchange Commission is suing WorldCom for fraud, and a date for the case has been set for March next year, in the U.S. District Court for the Southern District of New York.
WorldCom officials however are treating the IDT offer with skepticism.
"As far as we're concerned there are no negotiations going on" with IDT, said Julie Moore, a spokeswoman for WorldCom, based in Clinton, Mississippi. "WorldCom would consider any serious offer, but is highly unlikely to consider selling core business units, and these are core business units."
In comments punctuated with barbs regarding the WorldCom financial situation and management, IDT Chairman Howard Jonas said on the conference call Friday that "the same people who made this (WorldCom financial) situation are the ones sitting on top of it now."