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Company Perspectives

MCI WorldCom is a new kind of communications company. With revenue of more than $30 billion, MCI WorldCom combines financial strength and a depth of resources to pursue the industry's best growth opportunities with an advanced global network built for the data-intensive era of communications.

History of MCI WorldCom, Inc.

Ads by Google M&A Cross-Border Mergers & Acquisitions Business Sales, Invest in Italy Trading Forex Online Tight Spreads, ECN Broker, Support Fund Safety & Multiple Platforms Move Management Planning and Managing Moves Achieve Zero Downtime Telematrix Handsets Exclusive Distributor of Cetis: Teledex, Telmatrix, Scitec phones MCI WorldCom, Inc. is one of the largest telecommunications companies in the world. Formed on September 15, 1998, from the $37 billion merger of MCI Communications

Corporation and WorldCom, Inc., the company's operations are organized around three divisions: MCI WorldCom, U.S. telecommunications; UUNET WorldCom, Internet and technology services; and WorldCom International. The MCI WorldCom division is the second largest long distance company in the United States (after AT&T), with a 45,000mile nationwide fiber optic network, that provides local phone service in more than 100 markets and offers data, Internet, and other communications services. UUNET WorldCom maintains a highly reliable backbone network that provides local access to the Internet from more than 1,000 locations in the United States, Canada, Europe, and the Asia-Pacific region, in addition to a wide range of other Internet services. WorldCom International is a local, facilities-based competitor in 15 countries outside the United States, connecting to the company's overall global network more than 5,000 buildings in Australia, Belgium, Brazil, France, Ireland, Germany, Hong Kong, Italy, Japan, Mexico, The Netherlands, Singapore, Switzerland, Sweden, and the United Kingdom. Before the 1998 merger MCI Communications, founded in 1968, was well known as the company that led the charge in introducing competition in the telecommunications industry and precipitated the breakup of AT&T's Bell System. Following the breakup, MCI quickly became a multibillion-dollar global enterprise. WorldCom began as a reseller of long distance services in 1983 before emerging as the fourth largest long distance provider and a full-service telecommunications powerhouse in the mid-1990s. WorldCom's growth was aided by a series of major acquisitions, including Resurgens Communications Group, Inc. and Metromedia Communications Corporation (1993); IDB Communications Group, Inc. (1994); WilTel Network Services (1995); MFS Communications Company, Inc. and UUNET Technologies, Inc. (1996); and Brooks Fiber Properties, Inc., CompuServe Corporation's data network, and America Online Inc.'s network services subsidiary (all in 1998). MCI's History Began with 1963 FCC Application Founded in 1968 as Microwave Communications, Inc. (MCI) by John Goeken, owner of a mobile radio business, MCI's regulatory history began in 1963, when Goeken filed an application with the Federal Communications Commission (FCC) for permission to construct a private line microwave radio system between Chicago and St. Louis,

noted. history by challenging the prevailing public service principle that had been developed and applied to telephony during the 19th and 20th centuries. including AT&T. and regular long distance&mdashø subsidize the vast expense of constructing and maintaining the nation's communications network.. If . AT&T saw him as a small but important threat to its position as the nation's basic provider of phone services. The corporations argued that Goeken's proposed service would be redundant. AT&T actually had developed the technology and used microwaves on many of its long distance routes. Goeken proposed to offer a much cheaper alternative by employing microwave technology exclusively. As Fortune.Missouri. Western Union. in which quality and service were best achieved through one integrated system rather than through the play of competing interests.S. petitioned the FCC to deny Goeken's application. AT&T also used the revenue derived from these services to subsidize the price of local service. however. It was believed by those who built the system and those who came to regulate it that the communications industry was a natural monopoly. WATS. More important. AT&T charged that Goeken's service would skim the most profitable segment of the communications market at the expense of universal service provided by Bell. greater flexibility .. At the time when Goeken filed his application. Unlike the Bell System." In addition to carrying voice transmissions.T. wider choice of bandwidths. April 1970.'s. which had to expend enormous sums to maintain and operate the basic wireand-cable network. The public service principle derived from the philosophy that universal availability of telephone service could be achieved only through one independent and interconnecting network. Goeken proposed to erect a series of microwave towers between the two cities that would carry calls on a microwave beam. greater speed... AT&T depended on charging high rates for some of its intercity services--such as private line. In 1964 several corporations.&T. Goeken contended that he would provide a service not offered by any of the existing telephone companies: ". Goeken's application set the stage for one of the great corporate battles in U. the company stated that its greatest appeal would be to those who wanted to send data or a combination of data and voice messages. and prices as much as 94 percent cheaper than A. and GTE's Illinois-based subsidiary. making the cost of basic phone service affordable to the average customer. its Illinois Bell subsidiary.

the FCC paved the way for entry of competitive firms into certain markets. recording devices. demanded increasingly more access to the telecommunications market. claiming that the ostensibly new and innovative service was merely a variation of a service already offered. most of the delays stemmed from Goeken himself. computers. as the FCC was considering the newly incorporated MCI's application. armed with the new technologies. Goeken arrived on the scene proposing a supplemental service that he claimed was not being provided by any company. the FCC was compelled to respond. In 1959 the FCC permitted firms to operate private microwave communications systems for internal use. Almost immediately dozens of small firms entered the market seeking to sell equipment in competition with Bell products. this delicate system of rate averaging would be disrupted. and answering machines. Goeken claimed that he was seeking only a peripheral submarket much too small to disrupt AT&T's system of rate averaging. McGowan Arrived at MCI in 1968 In 1968. and coaxial cable. The seeds of change in the regulatory climate were sown in the revolution of new technologies that arose during and after World War II. In a string of rulings. With these two decisions. AT&T. the fortunes of the small company took a dramatic turn when William McGowan joined the company as chairman and chief executive officer. the FCC first in 1956 decided that under certain conditions non-Bell terminal equipment could be attached to the Bell System network. however. in addition to other technologies such as mobile radio. As these firms. Rapid technological advances in the fields of microwave relay. aggressive firms seeking to enter the telecommunications field. The FCC completely opened the terminal equipment market in 1968. satellites.Goeken and others were allowed to compete openly in the market. Although it was in the interest of AT&T and the others to stall proceedings as long as possible in the hope that Goeken would not pursue his plan. Filing deficiencies caused endless delays. gave rise to a number of small. McGowan saw promise in the . In this changing regulatory climate of the early 1960s. opposed the entry.

which had allowed individual firms to set up their own in-house microwave communications systems. McGowan launched a threepronged offensive. and the courts. Since other . in a four-to-three Most important. and soon devised a strategy that would lead MCI to phenomenal success. MCI's major asset was a fiveyear-old application to provide point-to-point private-line service by microwave between Chicago and St. AT&T responded aggressively to the FCC's MCI decision and was joined by Western Union and GTE in petitioning the FCC to reconsider MCI's application. When McGowan joined the firm. Almost immediately. The company hired Kenneth Cox in 1971 as a senior vice-president who was assigned to lobby the FCC. 1969. the FCC's MCI decision set the stage for a major battle over telecommunications policy as a result of the commission's failure to delineate clearly the boundaries of competition. which AT&T needed to support unprofitable rural routes and basic local phone service. Cox was a former FCC commissioner who had voted for approval of MCI's application in 1969. however. put his money behind it. The decision also assured MCI that it could interconnect with the Bell System network to enable MCI to provide its proposed services. the FCC. Instead of settling the AT&T-MCI dispute. the FCC authorized MCI's Chicago-St. Microwave Communications of America. McGowan set up a new company. At the same time the company announced plans for an 11. AT&T repeatedly charged that MCI would not be providing any new technologies or services but only would be skimming the most profitable routes. On August 13. Louis. lobbying Congress. McGowan began to orchestrate a legal-political strategy that would serve MCI extraordinarily well in later years when the company lobbied the FCC and Congress to grant its license.000-mile system that would run through 40 states and be operated by 16 affiliates. The market threatened by MCI's entry was considerably larger than the market opened by the FCC's 1959 decision. Louis application. It was clear to McGowan that to build MCI into a major national telecommunications network. AT&T's monopoly would have to be dismantled. to attract private investors to finance MCI-affiliated companies around the country.

designed to open only a specialized segment of the market.firms were then seeking entry to provide similar microwave private-line services. the company defaulted on its line of bank credit and was on the verge of collapse. but it did not stipulate at what cost or how quickly AT&T should install MCI's lines. MCI soon ran into trouble with AT&T. capitalizing on the . The FCC denied the petitions. Verged on Collapse in Early 1970s On June 22. Just months away from opening its nationwide microwave network. it began construction of the Chicago-St. The goal was to allow other firms to provide services not available from AT&T. reorganized as MCI Communications Corporation. and undermine the basic system of rate averaging. over the issue of interconnection with Bell's basic phone network. At the same time AT&T announced that it was instituting a new pricing system called HI/LOW to compete directly with MCI and others on private line routes. 1972. It was not the initial intention of the FCC to encourage full-scale competition with AT&T. Inc. Louis route. was narrow in scope and intent. the commission had a political stake in MCI's success. The FCC's 1971 deregulatory move. McGowan understood the FCC's commitment to the survival of competition. however. assisted by a $72 million line of bank credit. the companies argued that MCI could no longer be considered an isolated experiment and that increased competition would lead to higher prices. Because the FCC's rulings--especially the decision on MCI--had spawned such competition. Also in 1973 Microwave Communications. The FCC ruling had assured MCI that it could use Bell's local phone network to provide its service. The company also laid plans for its national microwave network that would run from coast to coast. To ensure MCI's preservation he worked quickly to enter the more profitable markets. MCI issued public stock. however. MCI countered that these concerns were unfounded. and in 1971 MCI received final approval to build its Chicago-St. raising more than $100 million. interfere with universal service. Louis route. By 1973 MCI was in financial trouble. and. Ultimately the 1971 FCC decision led to open entry into the private-line market.

Shortly thereafter. Orville Wright joined MCI. MCI won a major victory that served as a prelude to the company becoming a full-scale long distance competitor of AT&T. MCI soon began offering its long distance service to residential as well as business customers. In 1973 MCI also began lobbying the antitrust division of the Justice Department to file a suit against AT&T to break apart the Bell System. the Justice Department filed an antitrust case against AT&T to break up the Bell System. which AT&T saw as a violation of the intent of previous FCC rulings. The service. On March 6. however. Execunet Saved MCI. the company had yet to make a profit. The company. badly in need of cash. Between March 1973 and March 1975. MCI faced the possibility of bankruptcy. Led to Long Distance Competition in the Late 1970s Even though MCI had succeeded in enlarging its markets by winning approval to provide FX services. McGowan. in March 1980 MCI became the first AT&T competitor in . Wright soon became president. in a risky gamble. a service nearly identical to AT&T's regular. If the company was successful it could become a wealthy corporation. MCI had flagrantly exceeded its mandate. urged the FCC to authorize MCI to enlarge its services to include FX lines. required the use of Bell's switched network. In 1975 V. The breakthrough Execunet victory saved MCI from possible financial collapse. the company lost working capital at the rate of $1 million a month. in opposition to both AT&T and the FCC. and MCI was directed to cease providing Execunet service. Also in 1975.FCC's support. seeking damages from AT&T. but if it failed. had won the right to provide long distance service. 1974. In the fall of 1973. began to offer Execunet. In effect. It needed new markets and. and in 1978 the Supreme Court refused to review the appeal court's ruling that overturned the FCC ban on Execunet and ordered Bell to offer interconnection service to MCI. Such lines connect a single customer in one city to another city. AT&T protested to the FCC that by providing Execunet. In the protracted legal battle that ensued. The FCC concurred. MCI had cracked the Bell System monopoly. MCI filed a civil antitrust suit of its own. very profitable long distance service. MCI won an appeal. in which any number can be reached.

3 million in its civil antitrust suit against AT&T. On January 8. MCI's artificial cost advantage disappeared. In 1985 MCI was awarded a disappointing $113. Also in 1985. MCI's profits derived not from superior technology or innovative processes. acoustic echo canceller for Softphones . In 1985 MCI's stock plunged from more than $20 per share to under $7 per share.bdsound. responding to the competitive inroads made by MCI and others. Ads by Google Acoustic Echo Canceller . which bought 18 percent of MCI for cash with the option to expand its holdings later up to 30 percent. MCI saw its revenues increase sharply.www. which it passed on to . however. 1984 Bell System Breakup Led to Difficulties By the early 1980s it was clear that the government was winning its antitrust suit against AT&T. Once the local Bell operating companies were divested. however. Few. could afford to expend the enormous sums needed to build and maintain their own network facilities. despite having the second largest share of the long distance market. in need of capital to expand MCI's national network and to finance an aggressive marketing campaign to win new long distance customers. MCI's profit margins collapsed as it was compelled to reduce rates.Full-duplex.the residential market when it launched residential service in Denver. As a full-scale competitor in the lucrative long distance market. placed the company under financial strain in the immediate aftermath of the Bell System's breakup in 1984. The Execunet victory also opened the long distance market to other small firms. 1982. the Justice Department and AT&T announced agreement in the seven-year-old case. and in 1986 the company. posted a loss of $448. but from its cost advantage over AT&T. McGowan struck a deal with IBM. Higher access charges also squeezed the company. providing for the divestiture of the 22 wholly owned local Bell operating companies. began reducing its rates drastically.4 million. From the beginning. AT&T. By 1981 MCI's annual revenues approached $1 billion. high quality. MCI's successful crusade for deregulation and divestiture.

Find potential Investors Global Grab In 24 hours your list . The odd alliance was created by the companies' shared perception that deregulation would enable both to improve their financial outlook by increasing rates. Five years later the National Science Foundation Network (NSFNet) was launched. including acquisition of Satellite Business Systems. RCA Global . By the early 1990s MCI had weathered the wake of AT&T's divestiture and had expanded rapidly into providing a wide range of domestic and international voice and data communications services. a new nationwide e-mail system. Whereas McGowan had led the charge for deregulation throughout the 1970s. He was replaced as president by Bert C. international record communications services between the United States and more than 200 countries. The company had bolstered its position in domestic and international markets through a series of investments. Meantime. Orville Wright retired as president of McGowan continued to argue the need to regulate AT&T for several years before open competition could be considered viable. MCI called for the removal of all remaining regulatory restraints. The company's communications services included domestic and international long distance telephone service.V-century System . this ultra-high-speed digital network linked a number of academic computer centers and became the "backbone" of the Internet. Roberts Jr.www. and a domestic and international time-sensitive electronic mail service. but continued to serve as vice-chairman until 1990. he now argued that only vigorous regulation could guarantee that MCI and other competitors would be able to compete effectively with AT&T. The following year. constructed by MCI.vcentury. MCI was involved early on in what would later be dubbed the Internet. in 1985 V. In September 1983 the company launched MCI Mail. which had become competitors of MCI and AT&T. The two companies also had a shared interest in opposing proposals advanced by the FCC and the Justice Department to relax regulation of the former Bell operating companies. Long distance telephone service accounted for 90 percent of MCI's total revenues in 1989.

in the second half of 1990 MCI market share dropped to 13 percent. Inc. MCI Diversified Under Roberts in the Mid-1990s While the company focused almost exclusively on the long distance market when McGowan was in charge. a heart transplant recipient in 1987.. With the acquisitions. which offered 20 percent discounts to groups of MCI customers with members who phone each other. died of a heart attack the following June. MCI had approximately a 16 percent share of the domestic long distance market. Roberts was named to succeed him as chairman. McGowan. retaining the CEO post as well.25 billion Telecom*USA. Consequently.Communications. the same month that MCI completed the conversion of its entire nationwide network from analog to digital transmission. a provider of international data services. pushing its market share to 20 percent by the end of 1993. at the age of 64. one of the key events in later company history occurred--the launching of the Friends & Family marketing program. AT&T had been finding success winning back MCI customers through follow-up calls and an aggressive advertising blitz.. Friends & Family helped MCI attract seven million new customers. That same month. Inc. MCI's Friends & Family Program Launched in 1991 In March 1991 the company announced that it had acquired Overseas Telecommunications. and certain assets and contracts of Western Union's Advanced Transmission Systems division. then the nation's fourth largest long distance company. with McGowan remaining chairman. MCI under Roberts's leadership began diversifying in anticipation of both the further deregulation of the U. and acquired for $1. provider of international digital satellite services to 27 countries worldwide. In December 1991. telecommunications market and the predicted convergence of telecommunications. In 1990 MCI also purchased a 25 percent interest in INFONET Services Corporation. In September 1992 MCI entered into an alliance with Canadian long distance firm Stentor . computers. and entertainment. president and COO Roberts was named to the additional post of CEO.S.

paging. MCI and BT set up a joint venture called Concert Communications Company. Through MCImetro MCI planned to build a $2 billion fiber optic phone network. entered the long distance market in Mexico. document sharing. a joint venture to provide competitive long distance service in Mexico. BT purchased a 20 percent stake in MCI for $4. In June 1993 MCI and British Telecommunications plc (BT) announced that they would form a worldwide alliance to provide advanced global network services. MCI formed an alliance with banking group Grupo Financiero Banamex-Accival (Banacci) to form Avantel. In January 1994 MCI formed MCImetro. In Mexico. By July 1997 the new venture had captured about ten percent of the $4 billion long distance market in that country. The Telecommunications Act of 1996 (signed into law in February 1996) opened up competition even more. allowing local phone and long distance companies to compete in each other's markets and providing additional opportunities for MCImetro. News Corporation and MCI then set up American Sky Broadcasting (ASkyB). purchasing one of only three DBS licenses in 1996. which was 75 percent owned by BT and 25 percent owned by MCI. After completion of the 3. a joint venture aiming to provide digital satellite services to homes and businesses by late 1997. and videoconferencing. By 1995 the company had received regulatory approval as a competitive local carrier in 15 states. Avantel in August 1996 became the first company to provide alternative long distance service in Mexico. Concert offered worldwide voice and data services to multinational corporations. NetworkMCI.400-mile network. MCI introduced 1-800-COLLECT in May 1993.3 billion. fax. and unveiled create the first fully integrated digital network linking the United States and Canada. bypassing local phone companies and offering alternative local service. meantime. Internet access. was a software package aimed at small and medium-sized businesses that bundled e-mail. The two companies subsequently announced that they would develop a direct broadcast satellite (DBS) system in the United States. . Following regulatory approval in mid-1994. In September 1995 Avantel began construction of Mexico's first all-digital fiber optic network. MCI invested $1 billion for a ten percent stake in The News Corporation Limited in August 1995. the first collect calling service of its kind.

which was formed in 1983 in Hattiesburg. providing information technology services to commercial and governmental enterprises. Two weeks later. WorldCom Began as LDDS in 1983 WorldCom's history began with that of Long Distance Discount Services. Inc. MCI announced in July 1997 that its start-up local telephone operation would lose nearly $800 million in 1997. unsolicited bidders. Over the next few months MCI expanded Nationwide through additional contracts to resell service. Internet access and email.13 billion to acquire Canadian firm SHL Systemhouse Inc. a leading systems integration and outsourcing company. so that the company was able to offer service to 75 percent of the U.. Mississippi. The companies announced in August that BT would pay $19 million to acquire the 80 percent of MCI it did not already own. cellular.S. This opened the door. The following April MCI introduced MCI One. MCI thereby had quickly gained a significant presence in this fast-growing telecom sector without having to invest billions of dollars developing a wireless infrastructure. That November MCI and BT entered into a $24 million merger agreement to create a global communications power called Concert plc. amounting to a $37 billion stock swap. calling card. Inc. concluding that MCI was worth less than it originally thought.. population by early 1996.In September 1995 MCI entered the cellular phone market by paying about $210 million for Nationwide Cellular Service. including long distance. paging. the largest independent reseller of cellular services. about twice what BT had expected. a company more than three times its size. forced MCI to renegotiate the merger agreement. (LDDS). Taylor was named CEO. to other. WorldCom came forward on October 1 with a $30 billion stock swap bid for MCI. GTE Corporation stepped into the fray with an all-cash offer of $28 billion. however. when the breakup of AT&T . During 1996 Gerald H. a service providing consumers and small business owners a single source for a full range of communications needs. BT. with Roberts retaining the chairmanship. a 22 percent reduction from the previous deal. and a personal "One Number" with intelligent routing. In November 1995 MCI paid $1. On November 10 MCI accepted a sweetened takeover offer from WorldCom. As the merger moved through the process of clearing regulatory hurdles on both sides of the Atlantic.

in the 1970s. the lower its costs would be.000 each month. Price competition among these companies was ruthless. of its network and leased the lines from local providers. It became clear to Fields that he was failing at the day-to-day management of LDDS. often at a discount. or nodes. one of the initial investors. But when Bell started raising the charges for the use of the lines. Mississippi. By the early months of 1985 the fledgling business was losing $25. After graduation he became a high school baseball coach. borrowing the necessary money to establish himself in the business. LDDS owned the switches. and he first tried to sell the company. By the time Ebbers became president and chief executive officer. As head of LDDS. garnering healthy operating and asset gains.enabled thousands of competitors to start reselling long distance telephone service to individual and business customers. Ebbers worked to control costs. the value of prime properties could double over the course of five years. Long distance resellers like LDDS bought time from regional Bell companies in volume and sold it. The sophisticated long distance technology was designed to handle a high volume of calls. LDDS was $1. LDDS began to lose money. Fields signed up 200 customers. Bill Fields convinced several investors to lease a local Bell System Wide-Area Telecommunications Service (WATS) line and resell time on the line to businesses. He kept overhead low with lean operations and unpretentious offices. Ebbers parlayed his one hotel into 12 by the early 1980s. In the real estate market of the late 1970s. Assuming that the "Baby Bells" would continue to lease the lines at a fixed rate. Some observers compared the long distance telephone industry with the airline industry: there was a fixed cost for getting calls or seats from one place to another. . to business customers. Ebbers was a Canadian who came to the United States on a basketball scholarship to Mississippi College.5 million in debt. and the more customers a telecommunications company or airline had. Ebbers seized the chance to buy a 40-room motel in Columbia. but lost interest in the low-margin industry. Later in 1985 several owners signed LDDS over to Bernard Ebbers. He later worked in the garment trade as a distributor. The streamlined LDDS brought on new clients with a claim of customer service that larger long distance companies could not offer.

Kentucky. LDDS made monthly. Arkansas. Each company over which LDDS assumed control performed better after acquisition. and sometimes weekly. Part of the success was attributed to the LDDS standards of customer service. Inc. Indiana. and a year later sales had grown to $18 million. Microtel. LDDS was able to take advantage of this by concentrating on small business customers who were falling through the cracks. Telephone Management Corporation (1988). Consolidation and acquisitions were the principal factors that enabled LDDS to accomplish this rapid growth during the last five years of the 1980s. including: Telesphere Network. The company leveraged its order to buy other third-tier long distance companies. Companies in the system formulated their own marketing strategies in response to local market conditions. (1989). (1987). office calls to ensure that the customers' service was satisfactory. ClayDesta Communications of Texas (1989). LDDS applied its customer service ideals to new acquisitions through a decentralized system wherein each state office set its own sales goals. Alabama. The company provided an alternative to the major long distance carriers' across-the-board packages by tailoring service to each customer's calling patterns. Com-Link 21. (1989). but expanded LDDS's geographic network to include Missouri. By 1988 annual revenues had skyrocketed to $95 million. After the initial face-to-face solicitation. but mobilized a direct sales force to make personal contacts. Texas. and Florida.LDDS did not use telemarketing to solicit new business. but the economies of scale gained when more companies came on line also brought higher profitability. Inc. Inc. which simultaneously maximized routing efficiency and cut costs. LDDS Grew Rapidly Through Acquisition in the Late 1980s and Early 1990s Within six months of Ebbers's move into the driver's seat. of Tennessee (1988). Inc. the company had moved into the black.6 million. and Galesi Telecommunications of Florida (1989). In 1986 revenue rose to $8. . Inter-Comm Telephone. Tennessee. Kansas. The acquisitions cost the company a total of about $35 million. The major long distance carriers at this time also were exerting a great deal of effort to secure big-ticket clients.

000 in 1986 to more than $4. National Telecommunications of Austin was purchased with a combination of $27 million in cash and stock. Despite the recession. By the end of 1989. Between 1983 and 1991. ten times its 1986 total. as the telephone had long since established itself as an indispensable part of the business world. and it brought Advantage into profitability. more than double the industry average. using cash. purchasing Mercury. In fact. That same year the company merged with 17-year-old. Minnesota. and bank debt to finance purchases that totaled $90 million. LDDS's 1990 profit was $9. Sales had grown sixteenfold in that same time span. LDDS also made its largest acquisition up to that time with the purchase of Mid-American Communications Corporation. LDDS spent more than $200 million to purchase about 24 smaller companies. LDDS made three acquisitions in 1991. New Mexico.3 million and Tele-Marketing Corporation of Louisiana for $15. The acquisition of Phone America of Carolina established an LDDS presence in North and South Carolina and eastern Tennessee. Advantage Company. a system that . These two companies had combined annual revenues of $51 million. Its 14 percent annual internal growth rate was fueled by thorough infiltration of its growing markets.5 million in 1989.5 million. Illinois. Inc. incorporated under the name LDDS Communications. Kansas. The merger benefited both companies--it enabled LDDS to reduce its debt and finance future purchases through stock offers. and triple that of some of LDDS's higher-priced competitors. LDDS made two acquisitions that year. Colorado. LDDS was now a public company.000. for $10. Mid-American provided long distance service to Nebraska.LDDS's annual earnings grew from $641.41 million. The additions brought the LDDS network to 27 states. Inc. The acquisitions enabled LDDS to increase its sales by 71 percent over 1990 to $263. a public company that was losing money when the two consolidated. Nashville-based. stock. North Dakota. and Arizona. Despite the economic downturn of the early 1990s. LDDS continued its upward climb. Missouri.8 million. LDDS also pursued other avenues to spur growth. The long distance telephone business was not adversely affected by the economic climate. Wisconsin. LDDS's revenue-per-employee stood at $360.

In 1992 LDDS acquired Shared Use Network Systems. Inc. TFN Group Communications. Although merger-related expenses caused LDDS to take a loss of $8 million for the year. At about the same time. New York. the company expected to realize significant cost savings. The new affiliates filled in LDDS's service network and brought a total of $66 million in annual revenues. Despite its dramatic success. Therefore. Utah. LDDS's acquisition of ATC also made the consolidated company the fourth largest long distance provider in the United States (behind AT&T.. Florida. . Of course. Iowa.excluded only the Northeast and Northwest. Inc. The merger increased LDDS's annual revenues by 30 percent to $801 million in 1992. MCI. But a much more important development for the company in 1992 was its merger with Advanced Telecommunications Corporation (ATC). Automated Communications.. and a wider variety of products with the consolidation. Ltd. and Telemarketing Investments. AT&T started trying aggressively to win back customers of all sizes. as well as a negative net worth. combined. LDDS Became Fourth Largest Long Distance Company in 1992 LDDS did not stand idly by. Inc. Ohio.and medium-sized businesses they had previously neglected. LDDS and other third-tier long distance companies had captured about one percent only of the total long distance market at this point. Virginia. New Mexico. Nebraska. however. In the 1990s the big three telecommunications companies aimed for the small. expanded LDDS service in Arizona. Prime Telecommunications Corporation. more calls stayed on the network of low-cost transmission facilities that were owned or leased by LDDS. and Sprint). Cost savings were achieved through LDDS's ever-enlarging networks. which produced a situation in which a larger percentage of the company's calls originated and terminated within its service area. increased volume lowered the per-minute costs. increased opportunities for acquisitions. The Atlanta-based company had $350 million in annual sales spread over a network of 26 southern states. and West Virginia.. The downside of all of this growth was that it left the company with $165 million in long-term debt. These companies. Nevada.

in an effort to put to rest such speculation. With its eye on becoming a global leader in telecommunications. while MCC and Resurgens shareholders secured the remainder.In March 1993 LDDS acquired Dial-Net Inc. The merger extended LDDS's network to include all 48 mainland states. Basketball superstar Michael Jordan started a stint as a corporate spokesperson for the . in September 1993 the company merged with Metromedia Communications Corporation (MCC) of East Rutherford. In December 1994 the company acquired Culver City. Inc. undersea cables. LDDS had dodged rumors and predictions of imminent takeover almost since its inception.. voice and data networks.2 billion. Through the three-way transaction. and international earth stations and satellites. Williams had created an 11. LDDS issued 19 million new common shares in conjunction with the merger and made a private placement of $50 million in convertible preferred stock. with MCC's strength in the northeast and Resurgens's strength in California of particular importance. Gained through the purchase were gateways to 65 countries. Inc. as well as international gateways and networks. LDDS shareholders collected about 68. and Resurgens Communications Group. John Kluge. California-based IDB Communications Group. in a $900 million stock deal that greatly expanded its international capabilities. Two months later.. The new entity was renamed LDDS Communications. New Jersey. The next month LDDS completed the acquisition of WilTel Network Services for $2. valued at $1. the company changed its name to WorldCom.5 billion in cash from The Williams Companies. LDDS had quickly moved from being a leaser of a larger rival's phone lines to having one of the most sophisticated U. became chairman of LDDS Communications. Inc. the company moved into a new headquarters in Jackson.S.5 percent of the fully diluted equity of the combined company. Mississippi. in May 1995. It was one of only four national networks in the United States. which had operations spread throughout half of the United States. of Atlanta. Diversified LDDS Emerged as WorldCom in 1995 LDDS Communications dramatically broadened its telecommunications offerings in the mid-1990s through a series of significant acquisitions. and Ebbers was named CEO. a pipeline company. much of it snaked through unused oil and gas pipelines.000-mile fiber optic cable network. who had been chairman of MCC. Inc. networks.

Inc. WorldCom could now offer an impressive array of individual services--local. UUNET CEO John W. although the company recorded a net loss of $2. It was helped in this effort by the February 1996 signing into law of the Telecommunications Act of 1996. Inc. long distance.21 billion. The company received permission from state regulators in Connecticut. Sidgmore was named vice-chairman. One area in which it was clearly lacking was cellular. and international&mdash well as "bundled" services that were particularly attractive to businesses. one of the leading cellular resellers in the United States.70 billion. WorldCom . and Ebbers remained president and CEO. although in 1996 it had purchased Phoenix.4 billion in stock. MFS also owned a trans-Atlantic fiber optic link and had just acquired--in August 1996--UUNET Technologies. WorldCom signed agreements to become the primary provider of long distance service for GTE. California. Inc. The addition of MFS made WorldCom the first company to offer both local and long distance services over its own network in the United States since the AT&T breakup. Arizona-based Choice Cellular. and SBC Mobile Systems. Internet. Following the passage of this landmark legislation. Ameritech. From September through November 1997 the company announced acquisitions of CompuServe Corporation.2 billion in stock. MFS Chairman James in December of that year. Illinois.14 billion charge related to the acquisition of MFS. which permitted local and long distance companies to enter each other's markets. Having added international capabilities and a nationwide network to its core long distance business. WorldCom next aimed for a piece of the local communication service market. WorldCom revenues reached $4. Florida. a 65 percent increase over the prior year. reflecting a $2. in January 1998 for $1. In December 1996 WorldCom acquired MFS Communications Company. the world's largest Internet service provider (and also the first). MFS was a leading provider of alternative local network access facilities--bypassing the Bell networks--through digital fiber optic cable networks it had built in and around more than 50 U. cities as well as several in Europe. and MCI. CompuServe was acquired from H&R Block Inc. for $14.. But WorldCom was not done dealing. Crowe was named chairman of WorldCom following the merger. WorldCom recorded revenues of $3. Brooks Fiber Properties.49 billion in 1996.S. and Texas to provide local telephone service.. For the year.

meanwhile. fearful that MCI WorldCom would have too much control of the Internet backbone. and an international presence in more than 200 countries. agreed to buy the satellite television business of News Corporation and MCI WorldCom (including ASkyB) in a stock transaction valued at more than $1 billion. The resultant MCI WorldCom.000 miles of fiber for long distance service. was expected to add up to a company with revenues exceeding $30 billion.S. January 1998 also saw WorldCom complete its $2. the largest corporate bond deal in history. raising funds to help pay for its purchase of MCI. however.6 billion in cash. with MCI WorldCom slated to be left with a . Brooks Fiber added an additional 34 cities to the 52 markets where WorldCom already offered alternative local phone services. The combination of WorldCom and MCI. These network additions significantly bolstered UUNET's capacity. 1998. and MCI's Roberts was named chairman. markets.000 fiber miles for local service. WorldCom in August 1998 sold $6. local network facilities in 100 U. a 64 percent increase over 1996.A. In March 1998. Inc. was able to keep WorldCom's prized UUNET Internet operation. forced MCI to divest all of its Internet assets. some 933. which was consummated on September 15. boasted of 22 million customers.9 billion purchase of Brooks Fiber. The $37 billion merger (including $7 billion in cash paid by WorldCom to acquire BT's 20 percent stake in MCI). although it soon was eclipsed by other deals in the merger frenzy of the late 1990s. like MFS a provider of alternative local access networks in the United States. As with other WorldCom takeovers.retained CompuServe's data network but swapped its consumer online service division for America Online's ANS network services subsidiary. was at the time of its announcement in November 1997 the largest merger ever.1 billion in bonds. 508. however. 25 percent of the long distance market in the United States. Ebbers took the posts of president and CEO of the new entity. Telefonica de España S.35 billion. and MCI agreed in July 1998 to sell them to Cable & Wireless PLC for about $1. MCI WorldCom Created in 1998 For 1997 WorldCom posted revenues of $7. In December 1998 EchoStar Communications Corp. joined with WorldCom and MCI in business ventures that aimed at expanding MCI WorldCom's reach in Europe and Latin America. MCI WorldCom. European regulators.

P. 1997. J. "Convergence Calling. effectively bringing to a close the two companies' partnership. Dallas: Heritage Press. p." Business Week.. It was not the end of Concert. The History of MCI: 1968--1988." Chief Executive. "The Axman Cometh?: WorldCom's Pattern: Shopping. and MCI WorldCom was certain to be on the front line of nearly every battle. Not Elsewhere Classified Further Reference Barrett. and Elstrom. 65--66. Amy. Not Elsewhere Classified.000 Sales: $30 billion (1998 est. Except Radio.Epstein. 1997. pp." Business Week. 1986.Elstrom. Peter.Coll. Additional Details        Public Company Incorporated: 1998 Employees: 75.Elstrom. 32--36. Joseph.Cantelon. Steve.) Stock Exchanges: NASDAQ Ticker Symbol: WCOM SICs: 4813 Telephone Communications. Peter. Principal Divisions: MCI WorldCom. 36--37. "Making WorldCom Live Up to Its Name. 32--33. however. The Deal of the Century: The Breakup of AT&T. May 1996. pp. called On-Net. pp." Business Week. November 1989." Mississippi Business Journal. as BT had in the meantime formed a new global joint venture with AT&T to provide multinational clients a host of telecommunications and data services. 316. "Private-Label Long Distance. pp. Certainly the telecommunications wars--which MCI had helped precipitate--were only just beginning." Financial . 26--30. In late September 1998 the newly charged competitive environment was clearly evident when MCI WorldCom launched its own bundled service for multinationals. Philip L.Donlon. Peter. UUNET WorldCom. October 20. 4822 Telegraph & Other Message Communications. the Early Years. and others.. 1997. October 13. WorldCom International. In August 1998 BT agreed to buy MCI's 24. "The New World Order. New York: Atheneum. Then Chopping.stake of about seven percent in EchoStar. July 14."Bernie Ebbers Saved the Company. 7379 Computer Related Services. 4899 Communication Services.9 percent stake in the Concert joint venture for $1 billion. 1993. Concert was melded into this joint venture.

John J. 1994. . September 15. p. Judy. Mark. Jr. 1997. Cambridge: Ballinger Publishing. "LDDS Communications Wins Big by Thinking Small. and Lipin. 1998. 1985. On the Line: The Men of MCI--Who Took On AT&T.------. 1996. 1998." Fortune. October 2. Emory. Telecommunications in Turmoil: Technology and Public Policy. 118&plus. 1986. B4. Steven. 52--54.Keller. It's GTE's Turn." Wall Street Journal. Inc. D1. White Plains.Naik. pp. 1991. June 22.. A10. A1.Gianturco. August 23. Information. pp. 1994. pp.Lipin. and Naik. November 1989. MCI Deal Could Rewrite Script for a New Phone Era.: Spurge Ink!. p.Lewyn.. Disconnecting Parties." Wall Street Journal. "MCI: Can It Become the Communications Company of the Next Century?. p.Jones.. "LDDS Agrees To Acquire IDB in Stock Swap. pp. "LDDS: From Zero to $150 Million in Six Years. A1.Thomas. Michael.Frank. Brooke W. 1997. 1995." Mississippi Business Journal. New York: Knowledge Industry Publications. "WorldCom's MCI Bid Alters Playing Field for Telecom Industry. Alan. July 18. January 25. June 13. 1987." Fortune. Calif. Lorraine. Samuel A. MFS Confirm $12. Business Description. A4. and Keller..Faulhaber.. New York: McGraw-Hill. "Telephone Numbers.Sprout. 1994. 1994. November 11. John J. MCI Finds Itself More Scrutinized Than Ever. Benjamin A.Keller. pp.Selz. New York: Basic Books. "WorldCom Quietly Completes MCI Communications Purchase. "Critic's Choice: As It Steps Out from AT&T's Shadow. 107&plus. Background Information on MCI WorldCom." Wall Street Journal. "MCI: Attacking on All Fronts. 1995.Kahaner. Andrew.. B6. pp. "LDDS to Buy WilTel Unit from Williams. Gautam.. pp. A3.4 Billion Accord." Forbes. April 27. Kevin D. pp. 1998.. "MCI Is Coming Through Loud and Clear. May 9. Risked Everything and Won. 26--30. 76--79. and Holden. New York: Warner Books. But Analysts Say It's a Takeover Target." Wall Street Journal." Wall Street Journal. Larry. 1996. p. 84--85. Inc." Wall Street Journal. and Keller. Encino. 32--34. p.Spurge. A1." Wall Street Journal." Wall Street Journal. 1993. John J. 1998. A8.Simon. Gerald R.World. . 1989. History." Wall Street Journal. Jr." New York Times. Michael. Can It Rule Telecom?." Wall Street Journal. p. August 2. "The Re-engineering of Bernie Ebbers.. p. A3. Managing the Bell System Breakup: An Inside View. Alison L.Thomas. 108. April 27.Schiesel. pp. 1985. 1992. pp. "MCI WorldCom: It's the Biggest Merger Ever. 1997.." Financial World. "BT Cuts Purchase Price for MCI by $5 Billion. A6..Stone. Gautum. John J..------. Seth." Business Week. A3." Business Week.Tunstall.. "Merger Poses a Bold Challenge to Bells: WorldCom.Kupfer. After Divestiture: What the AT&T Settlement Means for Business and Residential Telephone Service. Emory.. "WorldCom. "The Battle for MCI Takes Another Twist: Now. August 27. 56.Mehta. "LDDS Prospers Through Aggressive Acquisitions. April 22..Company Profile. 1997. August 25. pp. Stephanie N. and Caleb Solomon. July 26. D5. Read more: MCI WorldCom.Ward. Robert. October 16. Wrong Number: The Breakup of AT&T. October 2. Failure Is Not an Option: How MCI Invented Competition in Telecommunications. Steven. .