JACKSON, Mississippi (October 29, 1996) --
WorldCom, Inc. (Nasdaq/NM:WCOM) today reported record revenues of
$1.13 billion for the third quarter ended September 30, 1996, up 21%
from revenues of $938.9 million for the third quarter of 1995. Net
income increased 60% to a new quarterly high of $109.1 million
compared with $68.3 million, before a special preferred stock
dividend payment in the 1995 third quarter. Fully diluted earnings
per common share increased 50% to $0.27 compared with $0.18, before
the one-time payment, a year ago. The prior year results include the
Choice Communications acquisition which is accounted for as a pooling
of interests.
Third quarter highlights included the following year-over-year
internal growth statistics:
- 30% increase in private line and frame relay revenues
- 22% increase in switched retail and wholesale business
revenues - 23% increase in switched retail and wholesale traffic
- 22% increase in total telecom traffic, including the operator
service division
Third quarter highlights included the following year-over-year
growth statistics for acquisitions:
- 79% increase in Choice Communications cellular revenues
- 133% increase in Choice Communications cellular traffic
For the nine months ended September 30, 1996, WorldCom, Inc.
reported revenues of $3.24 billion, up 20% from revenues of $2.71
billion for the first nine months of 1995. Net income, before
non-cash charges, increased 75% to $294.8 million compared with
$168.6 million before the special dividend payment in the 1995
nine-month period. Fully diluted earnings per common share, before
the non-cash charges, increased 52% to $0.73 compared with $0.48 a
year ago. Including the non-cash, after-tax charges of $344 million,
or $0.87 per share, and a non-cash extraordinary after-tax charge of
$24 million, or $0.06 per share, the company reported a net loss of
$73.2 million, or $0.18 per share, for the first nine months of
1996.
Bernard J. Ebbers, president and chief executive officer of
WorldCom, Inc., stated, "We are pleased to report such positive
results for the third quarter. The strength of our revenues in all
areas of our business, along with the efficiency of our cost
structure, led to the impressive earnings growth."
Third Quarter Activities
In July, the company launched LDDS WorldCom Advantage Plus, a
highly successful domestic calling plan designed for small- to
medium-sized businesses. A unique nationwide program offering
customers a pricing structure tailored to their individual interstate
and intrastate calling requirements, Advantage Plus provides business
customers simple, flat rate per minute pricing which is identical for
both outbound and toll-free service calling. In addition, Advantage
Plus customers are able to take advantage of WorldCom, Inc.'s
WorldForce international promotion, which gives them the ability to
tailor their international calling plans to their specific needs.
Also during the third quarter, a commercial-grade service package
for professionals who work at home was successfully test-marketed and
will be introduced nationwide with a cross-over promotion for
residential and business users. In addition, the company targeted the
consumer segment and households with family members living away from
home with a promotion offering Homebound 800K toll-free service at
highly competitive rates.
Television advertising aired throughout the quarter on the
national Cable News Network, targeting the business market with more
than 200 spots on CNN Headline News and Financial News Network.
Several commercial spots aired on CBS during the final rounds of the
PGA Championship received wide acclaim.
WorldCom, Inc. was selected by Cyrk, Inc, a Gloucester,
Massachusetts corporation, to provide the prepaid calling card for
the popular "Pepsi Stuff" program through which Pepsi
purchases may be redeemed for prizes. WorldCom, Inc.'s prepaid
calling cards continue to be among the most requested prizes.
Already a prominent provider of prepaid phone cards in promotional
and resale markets, WorldCom, Inc. in August signed a definitive
agreement to acquire BLT Technologies, Inc., the top U.S. supplier of
prepaid phone cards through retail channels. BLT Technologies is
perhaps best known for its Talk 'n Toss prepaid cards distributed
through major retailers, vending machines and financial institutions
nationwide. BLT's revenues have grown from $3.5 million in fiscal
1994 to $36.6 million in fiscal 1996. The acquisition is expected to
close in late 1996 or early 1997.
WorldCom, Inc. recently entered into an agreement with Netco
Communications Corporation to form a strategic alliance and financial
relationship for the purpose of accelerating deployment of
Netco's WAMNETJ digital data delivery services to the printing,
pre-press and graphic arts industries. The agreement builds upon
WorldCom, Inc.'s existing vendor relationship with Netco, and
contemplates a long-term relationship for the deployment of
Netco's advanced data transportation technology over
WorldCom's international communications network.
Underscoring its expanding international role, WorldCom, Inc.
recently signed an international frame relay network-to-network
interconnection agreement with TeleMedia International (TMI). TMI,
wholly owned by Telecom Italia, the sixth largest telecommunications
company in the world, provides advanced services for data, voice and
image transmission to multinational companies and organizations. The
new agreement with TMI will expand WorldCom, Inc.'s frame relay
service area to include the Middle East, Asia, South America, Africa
and several European countries, in addition to the company's
established international frame relay operations is key cities within
Canada, Europe, the Pacific Rim and Mexico.
During the third quarter, WorldCom, Inc.'s IDB Systems
business unit signed an agreement to provide state-of-the-art digital
satellite technology for Bangkok Broadcasting Television to support
coverage of news events throughout Thailand. The contract, valued at
$3.3 million, includes equipping three mobile vans with digital
satellite networking technology and converting 10 of BBTV's 2.4
meter-remote satellite stations to digital technology. Last year, IDB
Systems installed 35 remote satellite receiving stations across
Thailand for BBTV.
GridNet International, a majority-owned business unit of WorldCom,
Inc., announced in September a major agreement to serve as an
interconnecting Internet provider for BellSouth's BellSouth.net
and CommerceLink Internet services. GridNet is also providing
Internet services for BellAtlantic. Recently, GridNet unveiled an
Internet security service utilizing user fingerprints as passwords
for Internet access. The company is using finger-image biometric
technology provided through a special keyboard scanner or laptop
attachment.
In a move that will revolutionize network management in the
telecommunications industry, WorldCom, Inc. introduced the first
web-based utilization reporting tool featuring integrated voice and
data reporting capabilities. The new service, called Web NMS, allows
customers to use the Internet to retrieve performance data on frame
relay, toll-free and dedicated access lines. Fast, convenient access
to critical information will enable users to monitor traffic
real-time and make changes to optimize their network configurations.
WorldCom, Inc. and MFS Communications Company,
Inc.
On August 26, 1996, WorldCom, Inc. and MFS Communications Company,
Inc. ("MFS"), jointly announced that the two companies had
executed a definitive Agreement and Plan of Merger. The combination
of WorldCom, Inc., MFS and UUNET Technologies, Inc., which recently
merged with MFS, will bring together the leading growth companies
from every key telecom industry segment: long distance, local,
Internet and international. The merger will create one of the
world's premier business communications companies, providing a
single source for a full range of services over an advanced fiber
optic network. The combined company, to be known as MFS WorldCom,
will be the first company since the breakup of AT&T to bundle
local and long distance services carried over an international
end-to-end fiber network owned or controlled by a single company.
Under the terms of the agreement, each share of MFS common stock
will be exchanged for 2.1 shares of WorldCom, Inc. common stock.
Shareholders of both WorldCom, Inc. and MFS will be asked to vote on
the merger at separate meetings to be held on December 20, 1996. The
merger is expected to be completed in late 1996 or early 1997,
subject to typical conditions including approval of the shareholders
of each of the companies and approval of various federal and state
regulatory authorities.
WorldCom, Inc. has completed an independent research and
development appraisal in connection with the proposed merger between
WorldCom, Inc. and MFS. The appraisal valued the technologies of
MFS's Worldwide Information System, the Internet network
expansion system of UUNET, and certain other identified research and
development projects which will be purchased in connection with the
proposed merger between the company and MFS.
The result of the appraisal is the assignment of $2.14 billion to
MFS and UUNET in-process research and development which will be
expensed upon the consummation of the proposed merger. The expense
includes $1.6 billion associated with UUNET and $0.54 billion related
to MFS.
The preliminary allocation of purchase price in connection with
the proposed merger, subsequent to the research and development
expense, is as follows (dollars in millions):
| Amortization | Annual | ||
| Item | Amount | Life | Amortization |
| Goodwill related to MFS | $ 7,605.4 | 40 | $ 190.1 |
| Goodwill related to UUNET | $ 151.9 | 5 | $ 30.4 |
| Developed technology | $ 400.0 | 5 | $ 80.0 |
| Assembled workforce | $ 42.0 | 10 | $ 4.2 |
| Other MFS goodwill | $ 305.3 | Various | $ 22.6 |
The above allocation is based on the average price of $23.75 per
common share of WorldCom, Inc. just prior to and after the definitive
agreement date. This value is now fixed for purchase accounting
purposes and will not change based upon future stock price
fluctuations through closing and thereafter. Final allocations of
purchase price will be made during the one-year window period
subsequent to the closing date, in accordance with purchase
accounting conventions.
This press release contains forward-looking statements that
involve risks and uncertainties, including the satisfaction of the
conditions to the merger with MFS, allocation of purchase price,
annual amortization, in-process research and development expense, and
other risks detailed from time to time in the SEC reports filed by
WorldCom, Inc., including the report on Form 10-K filed by WorldCom,
Inc. for the year ended December 31, 1995. Because such statements
are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking
statements.
WorldCom, Inc. is one of the largest long distance
telecommunications companies in the United States, offering domestic
and international voice, data and video products and services to
business customers, other carriers and the residential market. The
company operates a nationwide digital fiber optic network in the
United States and has worldwide network capacity. The common shares
of WorldCom, Inc. trade on The Nasdaq Stock Market's National
Market under the symbol WCOM.
