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MCI to write down assets of $3.5 billion as sales fall

By Dana Cimilluca
Bloomberg News

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MCI's $10.9 billion of property, plant and equipment, and non-network assets will be sliced by almost one-third. The value of MCI's brand will be cut by $260 million and network assets will be reduced by about $3.25 billion, the Ashburn, Va.-based company said in a statement.

The writedown brings to almost $15 billion the amount of asset-value declines announced by U.S. phone carriers this month.

AT&T, the No. 1 long-distance operator, will slice values by $11.4 billion after a U.S. government decision lifted the cost of vying for local customers.

AT&T and MCI are retreating from the residential market as sales fall and expenses rise.

Excluding any writedown, MCI had a loss of 19 cents a share in the third quarter, the average estimate of analysts in a Thomson Financial survey. Based on 317 million shares outstanding at the end of June, that would be about $60 million.

Shares of MCI rose 1 cent to $16.19 yesterday before the announcement. They had fallen 31 percent this year.

A U.S. federal appeals court in March struck down regulations that enabled MCI, AT&T and Sprint, another long-distance operator, to rent the networks of local-phone companies including Verizon at below-market rates.

Sprint said last week that it would also write down its long-distance assets. The company said it will be more specific about the charge when it reports results tomorrow. The writedown may total $2.5 billion, said UBS analyst John Hodulik.

MCI had a second-quarter net loss of $71 million as sales fell by 15 percent to $5.24 billion. Sales of services fell 18 percent as customers turned to cellphones and local carriers that have entered the long-distance market.

MCI also declared a regular quarterly dividend of 40 cents a share, which will be paid on Dec. 15 to shareholders of record as of Dec. 1.

Copyright © 2004 The Seattle Times Company

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