WorldCom Says to Exit Wireless Resales, Cut Jobs
Wednesday June 5, 6:24 pm Eastern Time
Reuters Technology Report
CLINTON, Miss. (Reuters) - WorldCom Inc., the struggling long-distance telephone and data services company, on Wednesday said it will exit its unprofitable wireless resale business and cut some jobs as it tries to reduce expenses and ward off a cash crunch.
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"Slowing market growth, intense pricing pressure and acquisition cash requirements have rendered WorldCom's position as a pure reseller unprofitable," the Clinton, Mississippi- based company said.
The unit generates about $1 billion in revenue and nearly 2 million customers.
WorldCom (NasdaqNM:WCOM - News; NasdaqNM:MCIT - News) in April said it may sell up to $2 billion in assets, including the wireless resale business, as well as its stakes in Latin American telecom companies Avantel of Mexico and Embratel (NYSE:EMT - News) of Brazil. Proceeds from any sales would be used to pare WorldCom's debt load, which totaled $27.9 billion at the end of the first quarter.
WorldCom has been in the wireless business for more than five years, reselling services from the top two carriers in each market. It initially entered that business as a first step toward becoming a facilities-based wireless carrier, but that did not occur.
The company, which already has received interest from several major wireless carriers, said it will take several months to exit the business. Some of WorldCom Wireless' 2,200 employees will be fired shortly, while the remainder will continue operations in the interim period.
USA Today on Wednesday said the company plans to cut 16,000 workers, or about 20 percent of its work force, in a move to lower costs and preserve cash.
A WorldCom spokesman said the company plans "to align costs with revenue," but the timing and scope of any job cuts had not been determined. The company earlier this year said it would cut about 3,700 jobs, or 4 percent of its work force. It currently has about 80,000 employees.
The company last month said it would scrap its tracking stocks and dividend payments, saving $284 million a year.
WorldCom faces a regulatory inquiry into its accounting practices and personal loans it made to former Chief Executive Bernie Ebbers. WorldCom Group's stock was removed from the Standard & Poor's 500 Index, and credit ratings on its $30 billion in debt were slashed to "junk" status.
The company is in talks to secure $5 billion in new funding and restore investor confidence after its stock plunged 90 percent this year. It expects to have the financing in place this month.
The shares of WorldCom Group, the company's main data and Internet business, shed 3.6 cents to close at $1.41. The shares of MCI Group, its consumer long-distance telephone business, lost 2 cents to close at $2.53 on Nasdaq. |
