- The Washington Times - Tuesday, March 15, 2005

NEW YORK - Not long before Bernard Ebbers was forced out as WorldCom’s chief executive officer in the spring of 2002, the telecommunications empire he left behind was valued at $35 billion, employed 85,000 workers and served 20 million customers. The business showed several billion dollars in operating profit.

Those vital signs were soon exposed as a financial hoax that a jury yesterday found Ebbers guilty of orchestrating.

The fraudulent accounting, the ensuing bankruptcy, the loss of trust with customers and investors and the unrelenting decay in the long-distance telephone business have all taken their toll on the company — now the target of a takeover battle that prices the entire business at just a twentieth of its peak market value.

So what are Verizon Communications Inc. with its $6.7 billion merger agreement and Qwest Communications International Inc. with its rival $8 billion bid competing to acquire?

At last count, the company now renamed MCI Inc. served about 15 million customers and employed about 40,000 people. Revenue has plunged by more than a third to $20.7 billion and is expected to shrink by several billion in 2005.

The company reported a net loss of nearly $4 billion in 2004 with the ongoing cleanup of the financial mess left by Ebbers.

In a bid to restore some dignity, management renamed the company and relocated its headquarters to Ashburn, Va., from its former CEO’s home state of Mississippi.

The client base includes about 1 million business accounts. Compared with consumer services, that’s a more profitable market where Verizon and Qwest are both anxious to expand, particularly after the recent deal by SBC Communications Inc. to acquire AT&T; Corp. and it’s dominant share of the corporate sector.

In terms of physical assets, MCI still owns an Internet backbone network that carries more online traffic than any other.

However, that network is widely seen as technologically inferior because it is a patchwork of smaller networks that were strung together over a decade as Ebbers acquired more than 60 companies.

The company’s financial collapse both interfered with the complex job of integrating the divergent technologies used to build the assorted networks and prevented investment in the latest technologies.

That quandary is very evident in the merger proposals presented by both Verizon, which dominates phone service in the Northeast and Mid-Atlantic, and Qwest, the provider of local service across most of the Pacific Northwest.

New York-based Verizon has said it expects to invest heavily in upgrading MCI’s network. Denver-based Qwest would turn off large parts of MCI’s network and shift the traffic to its own fiber-optic network, which is smaller but was engineered and built by a single company.

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