MCI WorldCom to invest more in growth areas
By Jessica Hall
NEW YORK, June 2 (Reuters) - MCI WorldCom Inc. <WCOM.O>, the
No. 2 U.S. long distance telephone company, on Wednesday said it plans
to invest heavily in fast-growing businesses such as data, Internet and
international services as it continues to build its own global
communications networks.
The company plans to use $1.4 billion in proceeds from the sale of its
Systemhouse computer consulting business to invest in these
fast-growing businesses. The company expects its total 1999 capital
spending to be in the range of $7.5 billion to $7.9 billion.
"We're spending very little of our capital on long distance (phone
service)...it's all going toward data, international and Internet," Scott
Sullivan, MCI WorldCom's chief financial officer said at the company's
analyst meeting in New York.
Data, Internet and international services represented about a third of the
company's first quarter revenues but more than two-thirds of its revenue
growth. The company expects these businesses to continue to drive its
revenue and profit growth and to improve its profit margins.
MCI WorldCom also said it was comfortable with Wall Street analysts'
consensus earnings per share estimates of $1.97 for 1999 and $2.83 for
2000.
The company said it is also ahead of schedule in its plans to achieve $5.6
billion in costs savings or benefits from last year's $40 billion acquisition of
MCI Communications Corp.
Shares of MCI WorldCom gained $1.125 to $85.375 on Nasdaq.
At the combined company's first meeting with analysts, several top
executives outlined the company's strategic plans, including aggressive
overseas expansion.
"We want to be the most profitable, single-source provider of
communications services to customers around the world," MCI
WorldCom's Chief Executive Bernice Embers said. "We want to refocus
our attention on international markets, which are larger and faster growing
than the U.S....we want to focus on the international markets that are
opening to competition."
Overseas, the company said it is expanding its sales force, building its
network to connect more cities in Europe and rolling-out services in Asia
as those markets open up to competition. The company also wants to
increase its ownership and capacity of undersea networks.
MCI WorldCom plans to build its own facilities overseas and does not
believe it needs international partnerships, except for its existing
relationship with Spain's Telefonica de Espana SA. <TEF.MC>.
Telefonica's presence in Latin America allows MCI WorldCom to reach a
market that is attractive but not dense enough to warrant its own network
investments, Ebbers said.
As MCI WorldCom builds its presence overseas, it has seen intense
pricing pressure from the incumbent local monopolies. Despite this
pricing competition, Ebbers said the company still expects to improve its
profit margins and gain marketshare.
In addition to international expansion, the company will also expand its
networks in the United States. MCI WorldCom plans to use a variety of
access technologies to create a "mosaic" of local connections that allow it
to reach customers directly instead of through the Baby Bells' local
network.
The company plans to use a mix of its own networks, digital subscriber
line services, fixed wireless and eventually satellites, which would be an
attractive way to transmit broadcast video services, Vice Chairman John
Sidgmore said. MCI WorldCom recently agreed to acquire wireless cable
companies CAI Wireless Corp. <CWSS.OB> and privately-held Prime
One. The spectrum controlled by these companies was originally
intended to transmit cable television services, but MCI WorldCom will use
them to transmit voice and data services using cable modems in
customers' homes beginning later this year or in early 2000.
MCI WorldCom reiterated it does not feel it needs to be in the wireless
phone business now. It walked away from chances to buy two wireless
companies this year -- AirTouch Communications Inc. <ATI.N> and Nextel
Communications Inc. <NXTL.O>.
"We hope that someday we will have the opportunity to be in mobile
wireless....(but) the level of the need has not risen to the level where we
feel we have to do something," Ebbers said. It would move into wireless
"when a significant amount of our customers ask for it and when a
significant amount of them say they won't buy from us if we don't have
mobile wireless."
Ebbers said the planned $1.3 billion purchase of SkyTel Communications
Inc. <SKYT.O>, announced last week, does not mean the company
would pursue other paging businesses.
"SkyTel does several things for us. It's a very profitable business ... and
it's a foundation to build and deploy wireless networks and the
(cable-wireless) spectrum," Ebbers said.
biz.yahoo.com |
