WorldCom dropped from S&P 500 list

How the mighty have fallen. Bond rating agency Standard & Poor's Corp. dropped WorldCom Inc. from its influential S&P 500 index of publicly traded companies Monday, saying the company is no longer representative of the telecommunications industry.

WorldCom is still a US$4 billion company in market capitalization, even at its $1.44 share price at close of trading Monday. WorldCom reported quarterly revenue of about $5 billion in March. It's also the second-largest provider of long-distance phone services in the U.S. and its UUNet division handles more Internet traffic than any other backbone network, according to researcher Matrix NetSystems Inc.

But the company's stock has fallen 91 percent in a year, while the other 13 telecommunications companies in the index have fallen only 36 percent. Investors are concerned that the company won't be able to keep up with interest payments on billions of dollars in debt while long-distance revenue continually deteriorates amid capacity oversupply and heavy competition.

The S&P 500 change will force index fund managers to sell their WorldCom stock and replace it with shares of the Apollo Group Inc., which operates schools for adult professional education.

Former WorldCom Chief Executive Officer Bernard Ebbers dismissed the likelihood of the company leaving the S&P 500 list as "utter nonsense" in a conference call with investors following its dismal fourth-quarter report in February. He also dismissed the prospects of the Clinton, Mississippi, carrier's debt being downgraded below investment-grade status.

Both events have come to pass. Ebbers dismissed himself from his job last month.

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