Bloomberg - MCI WorldCom Plans to Cut 2,500 Jobs to Cut Expenses (Update3)
Jackson, Mississippi, Dec. 10 (Bloomberg) -- MCI WorldCom
Inc., the No. 2 U.S. long-distance phone company, plans to cut
less than 2,500 jobs, or about 3 percent of its workforce, as part
of an effort to slash $2.5 billion in expenses in 1999, people
familiar with the company's plans said.
Chief Executive Bernard Ebbers, who promised to cut costs when
WorldCom agreed to buy MCI a year ago, wants to eliminate
redundant positions in some businesses, such as local phone
operations and marketing. Two weeks ago, Ebbers said the company
is adding 8,000 employees a year to meet growth targets.
WorldCom, which has acquired more than 50 companies in the
past decade, is moving quickly to mesh its operations with MCI,
which it purchased for $47 billion in September. MCI WorldCom and
others are moving to slash costs to thrive in the highly
competitive long-distance phone market, where prices have dropped
to unprecedented levels.
''This is an integration of two companies who have duplicate
functions,'' said Daniel Zito, an analyst at Legg Mason Wood
Walker Inc., who has a ''buy'' rating on MCI WorldCom.
No. 1 AT&T Corp., MCI WorldCom's biggest rival, has cut
15,000 jobs so far this year and plans to shed another 3,000 by
year end. Last December, in preparation for WorldCom's purchase,
MCI cut about 1,500 jobs.
''The company has stated that it will be hitting certain
sales, general and administrative costs and that it will have to
remove a few people,'' said Mark Weeks, an MCI WorldCom spokesman
in London. He declined to be more specific.
The Wall Street Journal reported the job-cutting plans today.
Shares of the Jackson, Mississippi-based company rose 27/32
to 63 1/2 in midmorning trading.
U.S. Jobs
Most of the job cuts will be in the U.S. While some jobs will
be cut internationally, jobs added overseas will more than
compensate for the lost positions, spokesman Weeks said.
''It is across the company, this reduction in force,'' Weeks
said. ''Even on the international front there is some duplication,
but the net effect through next year is that we expect to see an
increase in the international workforce.''
The MCI purchase gave WorldCom two nationwide long-distance
networks, as well as operations in more than 100 local markets.
Each company had its own operations center to monitor its network,
as well as sales staff and product development teams.
Legg Mason's Zito estimates MCI WorldCom will save $125,000 a
year in salary and benefits for each employee it sheds.
Zito said most of the cost savings will come from terminating
traffic on the combined company's network. Prior to completing the
acquisition, WorldCom would have had to pay another carrier such
as MCI to complete its calls. Now, it can use MCI's network.
''That's where the big (savings) come from,'' he said. MCI
WorldCom has said it will save $1.2 billion in 1999 from combining
networks.
Competition
MCI WorldCom is pushing to take advantage of its lead in the
race to provide multinational corporations with all of their
communications needs worldwide. While AT&T and others are just
pushing into new markets like the U.S. local market, Europe and
the Internet, MCI WorldCom began investing years ago.
The company introduced new products that offer discounts of
as much as 35 percent to customers that use its network
exclusively, in a bid to attract more lucrative business customers
before competitors catch up.
AT&T is gaining on MCI WorldCom. AT&T plans to set up a
$3 billion joint venture with British Telecommunications Plc, the
U.K.'s largest phone company, next year and just this week agreed
to buy International Business Machines Corp.'s $5 billion.
And in the U.S., No. 4 long-distance company Qwest
Communications International Inc. and Level 3 Communications Inc.
are building new nationwide fiber-optic networks that they say
will be less expensive to run than networks run by MCI WorldCom,
AT&T and others.
Last month, Qwest said it will form a $1.2 billion joint
venture with Royal KPN NV, the Netherlands' dominant phone
company, to build a high-capacity fiber-optic network in Europe. |
