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MCI Communications Corporation FOUNDED: 1968

Contact Information: HEADQUARTERS: 1801 Pennsylvania Ave. Washington, DC 20006 PHONE: (202)872-1600 FAX: (202)887-3140 URL: http://www.mci.com

OVERVIEW MCI is the second-largest long-distance provider in the United States after AT&T. It is a leader and innovator in the telecommunications industry. MCI was instrumental in forging an opening in that industry for companies to compete with AT&T. It continued in the late 1990s to lead all others except for AT&T, which had held an industrywide monopoly until the 1980s. The company, located just a few blocks from the White House, has offices in 300 locations around the world, and competes in a wide variety of communication service markets. In 1997, the global long-distance company World-Com Inc. made a $30-billion bid to buy MCI. GTE made a $28 billion offer. After some negotiation, MCI agreed to a $37-billion purchase by WorldCom. The merger was announced November 10, 1997 and the new company will be named MCI WorldCom.

COMPANY FINANCES Upon announcing the merger of MCI and World-Com Inc., the combined firms projected over $30 billion in revenues for 1998. In 1997 MCI had net income of $209 million on revenue of $19.65 billion, as compared to 1996 when net income was __BODY__.20 billion on revenue of $18.49 billion. This was a considerable increase over 1995 income of $548 million on $15.26 billion in revenues. Earnings per share of stock rose from $.80 in 1995 to __BODY__.73 in 1996, and fell to $.29 in 1997. MCI's long distance services represent more than 90 percent of its revenues.

ANALYSTS' OPINIONS Although the MCI/WorldCom merger was touted by both companies as the joining of "two of the industry's most entrepreneurial and competitive forces," the U.S. Department of Justice and the European anti-trust chief declared in the spring of 1998 that they would try to obtain "concessions" from both companies before granting regulatory clearance. The U.S. and European regulators were mainly concerned with the potential for anticompetitive corporate behavior.

HISTORY MCI began when John Goeken wanted to provide a radio link between Chicago and St. Louis. In 1966, AT&T held a virtual monopoly over what would later be called the telecommunications industry. Goeken had to go before the Federal Communications Commission (FCC) to obtain permission to set up his link. He formed an enterprise called Microwave Communications, Inc., which became MCI Communications in 1968. By this time Goeken had departed, and William McGowan had taken the helm of the new company. Throughout the 1970s, MCI fought one legal battle after another in a drama that cast it as "David" to AT&T's "Goliath." However, by the end of the decade, it had won almost full competition rights. MCI found its position further improved when the breakup of AT&T into several "Baby Bells" was ordered in the 1980s. In 1982 MCI bought Western Union, once a telecommunications giant in the era when people regularly sent telegrams, from Xerox. A year later, it became the first telephone company to involve itself in the new high-tech version of the telegram, e-mail, when it launched MCI Mail in 1983. This was long before most Americans even knew about the Internet. In 1988 it acquired RCA Global Communications, a major phone-service provider in Asia, from General Electric. Two years later, MCI bought Telecom USA, at that time the fourth-largest long-distance carrier in the United States. During the 1990s, MCI became heavily involved in the Internet. It also launched several successful marketing programs, including 1-800-COLLECT and Friends & Family. In 1993, MCI and British Telecom (BT) formed a joint venture called Concert Global Communications, which would sell telecommunications services worldwide. When MCI merged with WorldCom, the company planned to enter new markets and offer local phone service. According to the terms of the agreement, MCI owned 45 percent of the newly formed company.

STRATEGY MCI's strategy has been one of increasing diversification within the telecommunications industry. It is a combination of a simplified customer package and aggressive marketing. The company's services span a wide spectrum, from cellular phones to Internet service. Still, it seeks to keep the customer billing and contact simple and manageable. Hence MCI One, a package that allows small business and residential customers to deal with a single company for all their communication needs: long distance, cellular, paging, and Internet access. As for MCI's marketing, the company had little reason to fear low name-recognition in the 1990s. Friends & Family was a program that proved an enormous success when it was launched in 1992 with a series of television commercials. It allowed customers to obtain special rates for the long-distance numbers they called most frequently, presumably loved ones at a distance. MCI has also made good use of marketing partnerships with other companies, including the sale of its phone service through the wide Amway distributor network, and the offering of frequent flyer miles on Delta or other airlines. Among the airline companies involved in partnerships with MCI in 1997 were, American, Continental, Northwest, Midwest Express, and Southwest. Also involved with MCI were Holiday Inn, American Express, SAM's Club, and Staples. MCI is continually expanding worldwide, with joint ventures and telephone linkups between countries. It is also expanding its U.S. market. The trade journal Advertising Age reported in June 1995 that MCI had launched a __BODY__-million television campaign featuring a long-distance romance between the characters "Rahul" and "Rohini." These ads are specifically targeted at people from India, a market of more than 1 million in the United States. In addition, the same journal reported that the company had commenced an even more innovative marketing campaign. This was one focused on the gay and lesbian community, a lucrative market. MCI's merger with WorldCom created what MCI called "the first fully integrated communications company." MCI WorldCom planned to offer a complete range of local, long distance, Internet and international communications services. Together, the two companies had 22 million customers, and 70,000 employees in more than 200 countries.

INFLUENCES William McGowan, the architect of MCI's growth in the 1970s, once quipped that his company was "a law firm with an antenna on top." In fact, its first decade in business saw MCI in and out of courtrooms in its battle to gain leverage in the market against the AT&T monopoly. MCI had to fight with AT&T in order to begin its existence. By 1973 it had local business service in 40 cities, yet it was not allowed to link its customers by long distance. In March 1974 MCI filed antitrust suits against AT&T under the Sherman Antitrust Act, which forbids the operation of a monopoly—a single business that entirely controls an industry. By March 1980 it had become the first company to compete against AT&T in a residential market, in Denver. In June 1980 it won __BODY__.8 billion in damages against the industry giant on charges that AT&T maintained anti-competitive practices. The 1980s were an era of triumph for MCI. The time came, however, when it faced competition from a horde of other newcomers, such as Sprint. MCI, growing and branching out with mergers and acquisitions, was no longer a "David." When compared to the younger companies, it was a "Goliath" in its own right. Meanwhile, AT&T regrouped. In 1994, it took 1.1 million customers from MCI through an aggressive marketing campaign of its own. In August 1996, MCI won Call Center magazine's "Technology Leadership Award" for its technological advances. Some of the other commentary is not so positive. An article in Fortune magazine's October 1995 issue, for instance, indicated that Wall Street did not share the vision of MCI as a telecommunications leader for the next century. MCI was also criticized for diversifying and entering into joint ventures in a slapdash, willy-nilly fashion. Business Week in February 1995, observed that the company's stock had reached a new low as a result of losing 1.1 million customers to AT&T, and that MCI was searching for a strategy. The Economist in February 1996 referred to a venture that linked MCI with Microsoft as "promiscuous." The article's title indicated that the company was "In Search of a Strategy."

FAST FACTS: About MCI Communications Corporation

Ownership: MCI is a publicly owned corporation traded on NASDAQ. Ticker symbol: MCIC

Officers: Bert C. Roberts Jr., Chmn., 55; Gerald H. Taylor, CEO, 56; Timothy F. Price, Pres. & COO, 44 Employees: 60,409 (1997) Principal Subsidiary Companies: Among the many subsidiaries of MCI are: MCI Systemhouse Inc., MCI Metro Inc., Nationwide Cellular Service Inc., and The News Corp. Ltd. Chief Competitors: MCI Communications competes directly with: AirTouch; AT&T; Bell Atlantic; Bell-South; EDS; GTE; NYNEX; and Sprint.

CURRENT TRENDS With the deregulation of the phone market, customers by the late 1990s often found themselves overwhelmedby a variety of competing companies. Each had their own claims of superiority over others. Consequently, one trend evidenced by MCI is simplicity, or one-stop shopping. This, in turn, meant diversification on the company's part. By 1997, it was heavily involved in long distance, local, Internet, wireless, and systems integration service. In an age of global communications, MCI has also established footholds all over the world, specifically through joint ventures with companies in Mexico, Canada, and New Zealand. These culminated in the company's merger, announced in 1996, with WorldCom. WorldCom beat out British Telecom and GTE in the competition for MCI.

PRODUCTS By the late 1990s, MCI competed in the long distance, local, Internet, wireless, and systems integration markets. MCI One is a one-stop package for residential customers to combine all these types of services. NetworkMCI One is the business equivalent of MCI One. MCI's Internet division, internetMCI, offers access service and software. In the area of wireless communication, the company claims to have the largest combined service area, "or wireless footprint," in the nation. Systems integration is a new market area operated by MCI Systemhouse, a __BODY__.4-billion global information technology company. In line with company diversification, MCI in November 1995

launched 1-800-MUSIC NOW. This gives consumers an opportunity to call a number and purchase CDS or cassettes over the phone. In December 1996, MCI introduced 10-3-2-1, an un-branded alternative access service for customers who wanted a 10-xxx option for long distance dialing.

GLOBAL PRESENCE MCI partnered with a Mexican company to create Avantel, a long distance provider in that nation, Stentor is a Canadian joint venture. Another joint-venture partner, Clear Communications, a New Zealand company, was (like MCI) the first competitor against its nation's previous monopoly provider.

CHRONOLOGY: Key Dates for MCI Communications Corporation 1966: John Goeken sets up Microwave Communications, Inc. 1968: Goeken departs and the company becomes MCI Communications 1982: Western Union buys Western Union 1983: MCI Mail is launched as the first company to provide e-mail services 1984: AT&T is forced to break up its monopoly, strengthening MCI's position in the market 1990:

Purchases Telecom USA 1993: MCI launches 1-800-COLLECT 1998: WorldCom Inc. and MCI announce merger MCI has offices in 70 countries, and operates international earth stations in orbit to provide trans-Atlantic and trans-Pacific satellite communications. The company has offices in 17 Latin American countries, and virtually every country in Europe. In 1991, it received authority from the Chinese government to provide direct longdistance service between that country and the United States. It also plans a venture linking Japan and China with a number of Southeast Asian and Pacific Rim countries, including Vietnam. MCI is a highly visible presence in the Middle East, where in August 1994 it became the first carrier to link neighbors Israel and Jordan with longdistance service.

SOURCES OF INFORMATION Bibliography Cleland, Kim. "MCI Effort Has Flavor of India." Advertising Age, 19 June 1995. ——. "MCI Names New Tune With Music Service." Advertising Age, 13 November 1995. Davey, Tom. "MCI-BT Deal May Speed Local Service Offerings." PC Week, 11 November 1996. "EU to Follow DOJ Lead." CNN Financial Network, 26 May 1998. Available at http://www.cnnfn.com/hotstories/deals/. Fitzgerald, Kate. "MCI Rings Up Gays Via Direct Marketing." Advertising Age, 5 June 1995. Lewyn, Mark. "MCI: A Smaller Family and Fewer Friends." Business Week, 6 February 1995. "MCI Communications." Hoover's Handbook of American Business 1998. Austin, TX: The Reference Press, 1997. MCI Home Page, 28 May 1998. Available at http://www.mci.com/.

"MCI's Alliances: In Search of a Strategy." The Economist, 3 February 1996. Sprout, Alison. "MCI: Can it Become the Communications Company of the Next Century?" Fortune, 2 October 1995.

For an annual report: on the Internet at: http://www.mci.com/ or write: MCI Communications, Investor Relations, 1801 Pennsylvania Ave., Washington, D.C. 20006...