MCI has formally emerged from Chapter 11 bankruptcy protection and is beginning to distribute securities and cash to its creditors.
The company's plan of reorganisation, confirmed on October 31, 2003, by the U.S. Bankruptcy Court for the Southern District of New York, is now effective, MCI (formerly known as WorldCom) said. WorldCom filed for bankruptcy in July 2002, with debts of US$32.8 billion, but was able to continue operating under Chapter 11 of the U.S. Bankruptcy Code. The company formally changed its name to MCI with Tuesday's announcement.
Michael Capellas, MCI president and chief executive officer, called Tuesday a "day of celebration," and the company can now focus on selling its products and services. "I don't think we view this as a sort of finish line," Capellas said during a conference call Tuesday.
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, it said. The company has retained all of its largest corporate customers and has signed many new accounts, it said. With a large Internet Protocol (IP) infrastructure in place, MCI can package traditional telephony with IP-based services, and it can effectively compete in an increasingly competitive enterprise telecommunications marketplace, Capellas said.
"You don't just enter the enterprise side casually," he said. "We've got years of history. We're certainly ready for (competition)."
MCI will roll out new products and services in the next few weeks and months, and will announce several new partnerships, it said. The company will focus on expanding globally, offering managed services and offering new IP-based telecom products, among other things, Capellas said.
The company leaves bankruptcy with about $6 billion in cash and about $5.5 billion in debt, Capellas said. The company posted a $145 million net loss in December, compared to a $21 million net loss in November, according to bankruptcy filings. It's cash balance at the end of December was $5.6 billion.
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.
"Some people say, 'How did you get here?'" said Capellas, who joined MCI in November 2002. "You see the obstacles, you kick them down one at a time, and when you get done, you go over to the next one. It was sort of a marathon with hurdles."
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."
The end of bankruptcy for MCI means more than a one-day celebration, said Jeff Kagan, an independent telecom analyst.
"Don't underestimate the importance of milestones," Kagan said in an e-mail. "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."
Kagan called MCI's emerging from bankruptcy the "crossing of a huge hurdle."
"It's got to be like a huge weight was lifted off their shoulders," he said. "After all, it was only two years ago we wondered if they'd survive at all. But this is not the end game for MCI. This is only the end of one chapter: the ugly chapter. Today they start the next chapter with its own sets of challenges and opportunities."
Among MCI's challenges will be continuing to focus on ethics and to respond to the rapidly changing telecom marketplace, Kagan said. 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, often called the regional Bells, in the future, he added.
"(MCI) instead can focus more on delivering services where voice is just another application on the data network like e-mail and video," Kagan said.