Cash earnings per share up 59 percent to $0.54; Earnings per share up 83 percent from first quarter 1999 to
$0.44
CLINTON, Miss., (April 27, 2000) -- MCI WORLDCOM, Inc. (NASDAQ:WCOM)
today reported strong profitability gains in first quarter 2000 driven
by robust data, Internet and international revenues and declining
access and technology costs. For the quarter ending March 31, 2000,
earnings before goodwill amortization (cash earnings) increased 59
percent year-over-year to $1.6 billion, or $0.54 per common share. Net
income increased 80 percent to $1.3 billion, or $0.44 per common
share.
Revenue Growth
Communications services revenues, net of voice access costs,
increased 19 percent year-over-year. Including access costs paid to
local exchange carriers, communications services posted revenues of $10
billion. The incremental year-over-year revenue gain of $1.3 billion
for the quarter represents 14 percent growth. Excluding WorldCom's
interest in the Brazilian telecommunications company Embratel,
communications services revenues were $9.2 billion, a year-over-year
increase of 14 percent or $1.1 billion.
Data, Internet and international revenues grew 32 percent or $1.1
billion from the year-ago quarter to $4.6 billion and now account for
46 percent of WorldCom's total revenues. Capitalizing on its data and
Internet services leadership, WorldCom recently announced
"generation d," a major initiative to extend its network
services to include five value-added services to facilitate e-commerce
and e-business. They include network and access, hosting, e-business
"toolkits," turn-key web solutions, and custom web
solutions.
MANAGEMENT'S COMMENTS ON THE FIRST QUARTER RESULTS
"WorldCom continues to enjoy success in its focus markets. On
an annualized basis, data, Internet and international services
represent more than $18 billion of annualized revenues growing at 32
percent," said Bernard J. Ebbers, president and CEO of WorldCom.
"We are clearly leading the communications industry into a new era
dominated by data- and Internet-based services, and our newly announced
generation d initiatives leverage our existing strengths."
"Generation d will position WorldCom as a preeminent supplier
of e-business solutions. We're focusing on providing carrier class
e-business services to both emerging e-companies and established
companies who are adding e-capabilities to their service set,"
Ebbers continued. "As e-business becomes a mission critical
component for many large companies they will look for established,
reliable, proven providers that can do for e-business what they have
done for large, sophisticated private networks. Finally, because we
leverage our own facilities end-to-end, we're in an ideal position
to offer complementary services like hosting and a full range of web
solutions from turn-key to complex, managed services."
COMMUNICATIONS SERVICES - REVENUE COMPARISON
($ in millions) | Financial Reporting | Excluding Embratel | ||||||
1Q00 | 1Q99 | Change | 1Q00 | 1Q99 | Change | |||
Revenues | ||||||||
Voice | $ 5,363 | $ 5,216 | 3% | $ 5,363 | $ 5,216 | 3% | ||
Data | 2,146 | 1,702 | 26% | 2,146 | 1,702 | 26% | ||
Internet | 1,104 | 758 | 46% | 1,104 | 758 | 46% | ||
International | 1,365 | 1,043 | 31% | 537 | 357 | 50% | ||
Communications services | $ 9,978 | $ 8,719 | 14% | $ 9,150 | $ 8,033 | 14% |
Note: SkyTel revenues are included in the voice line item in all
periods.
DOMESTIC DATA REVENUES
Data revenues grew $444 million or 26 percent from the first quarter
of 1999 to $2.1 billion, driven by increases in capacity and number of
connections from existing customers as well as new customer growth. The
Company experienced a 95 percent increase in Voice Grade Equivalents
(VGEs capture the volume of private line circuits), as well as strong
increases in frame relay and ATM ports and port speeds.
INTERNET REVENUES
Internet revenues increased $346 million or 46 percent
year-over-year to $1.1 billion. Internet revenues were driven by strong
growth in dedicated broadband connections as well as value-added
services such as hosting, security services, and Internet-based virtual
private networks.
WorldCom added 367,000 modems in the first quarter, and now has more
than 2 million dial-up modems in service. Customers spent more than 1.5
billion hours connected to WorldCom's dial-up Internet services during
the quarter, an increase of 66 percent from one year ago. In fact,
customers now spend more than twice as much time on WorldCom's dial-up
Internet services as they do on voice calls.
During the quarter, WorldCom and AOL announced a five-year extension
of existing agreements for dial-up access services in the U.S.
WorldCom's subsidiary, UUNET, has been a provider for AOLnet for
several years. Under the expanded relationship, WorldCom will continue
to build out and manage a significant portion of AOLnet as well as
continue to provide AOL with dial-up services.
INTERNATIONAL REVENUES
International revenues, those originating outside the U.S., posted a
$322 million or 31 percent increase from the first quarter of 1999 to
$1.4 billion. Strong data and voice results drove the growth. Excluding
Embratel, year-over-year international revenue growth was $180 million
or 50 percent.
During the quarter, WorldCom continued to extend the reach of its
end-to-end network, adding nearly 1,000 buildings for a total of 11,000
international buildings on-net.
DOMESTIC VOICE REVENUES
Domestic voice revenues grew 3 percent year-over-year to $5.4
billion on minute growth of 14 percent. WorldCom local services account
for more than 55 percent of the Company's incremental voice growth
compared to the first quarter of 1999 with good results in both
business and consumer markets. During the quarter, WorldCom added
approximately 100,000 local service residential customers in New York
State giving it a base of about 300,000 local customers there. This
represents about 5 percent local service market share and penetration
of about 25 percent of WorldCom's New York residential long distance
subscriber base after only one year of operation.
PROFITABILITY MEASURES
Gross margins increased by 4 percentage points year-over-year,
generating $5.9 billion of gross profit. This represents 18 percent
growth from the first quarter of last year. Line costs, which denote
the cost of using local lines provided by local exchange carriers and
other network operating costs, were essentially the same as the
year-ago period and as a percentage of revenues declined by 4
percentage points from the year-ago period. This is due to declining
access costs from local exchange carriers and increased origination and
termination of traffic on lower-cost WorldCom owned facilities and
declining technology costs.
Selling, general and administrative expenses declined 3 percent from
the year-ago period. Much of the cost savings stem from synergies
attributable to the MCI merger. EBITDA (earnings before interest,
taxes, depreciation and amortization) margins increased by 7 percentage
points year-over-year to 36 percent of revenues or $3.6 billion.
Operating income grew 62 percent from the first quarter of 1999 to
$2.4 billion with depreciation and amortization growing only 4 percent
from that period.
COMPARATIVES
($ in millions) | Financial Reporting | Excluding Embratel | ||||||
1Q00 | 1Q99 | Change | 1Q00 | 1Q99 | Change | |||
Communications services revenues | $ 9,978 | $ 8,719 | 14% | $ 9,150 | $ 8,033 | 14% | ||
Gross margins | $ 5,886 | $ 4,985 | 18% | $ 5,455 | $ 4,649 | 17% | ||
% of revenues | 59% | 55% | 60% | 55% | ||||
EBITDA | $ 3,587 | $ 2,611 | 37% | $ 3,346 | $ 2,449 | 37% | ||
% of revenues | 36% | 29% | 37% | 29% | ||||
Operating income | $ 2,440 | $ 1,510 | 62% | $ 2,322 | $ 1,466 | 58% | ||
% of revenues | 24% | 17% | 25% | 17% | ||||
Net income applicable to common shareholders | $ 1,284 | $ 712 | 80% | $ 1,270 | $ 731 | 74% | ||
% of revenues | 13% | 8% | 14% | 9% |
NON-OPERATING INCOME (EXPENSE)
First quarter 2000 other income and expense includes $218 million of
interest expense and miscellaneous income of $111 million.
Miscellaneous income includes $42 million of recurring income, $28
million of other income from Embratel and $41 million of other net
pretax gain items related to the WorldCom Venture Fund and other items.
Other income in the year-ago period included $67 million in realized
investment gains on securities held by the Fund, offset by $28 million
in early bond call payments.
OUTLOOK
Commenting on the outlook for WorldCom, Ebbers said, "We
continue to expect strong growth from our data, Internet and
international businesses in 2000. The investments that we are making in
these fast growing areas are driving our growth as we lead our
industry's transition to all-distance services."
"Our investment in Embratel has been quite successful. They are
proving to be skilled business operators, have exceeded our
expectations and are contributing nicely to our profit
growth."
SIGNIFICANT DEVELOPMENTS DURING THE QUARTER
WorldCom announced plans to upgrade its U.S. Internet backbone
network to full, line-rate OC-192c, or 10 gigabits per second, speeds.
The Company activated OC-192c circuits with Multi Protocol Label
Switching (MPLS) technology between three of the Company's major hubs
located in Chicago, New York and Washington, D.C. This major upgrade
marks the first known deployment of OC-192c with MPLS in a true
production environment. This upgrade will quadruple the Company's
current network speed of OC-48c and allows WorldCom to carry commercial
traffic at the highest Internet Protocol transmission speeds
available.
WorldCom was the first U.S. carrier to be awarded a facilities based
operators license in Singapore. In line with its international
strategy, WorldCom will focus its facilities based activities on
Singapore's central business areas.
The Company also added Geneva, Switzerland and Milan, Italy to its
Pan European network, currently reaching approximately 75 percent of
the $225 billion European telecom market. The recently completed Geneva
and Milan sections extend WorldCom's Pan European network by
approximately 2,000 km and the network now stretches nearly 14,000 km
with initial total bandwidth of 10 Gbit/s. In addition, the Company
launched a new metropolitan city fiber network in Milan.
WorldCom introduced intelligent bandwidth services for high-speed
data - Smart Bandwidth on Command for ATM and Web Digital
Reconfiguration Service (Web DRS). These new services empower customers
to manipulate bandwidth in real-time.
WorldCom successfully completed the industry's first live commercial
trial of next-generation optical networking equipment from Nortel
Networks, setting the stage for a new era of networking. In the trial,
WorldCom successfully carried a Terabit of traffic per second on a
single strand of fiber.
During the quarter, WorldCom announced that high-speed wireless data
service trials are underway in Boston, Dallas, Jackson, Baton Rouge and
Memphis. These trials are an initial step in WorldCom's strategic
efforts to offer high-speed, broadband services using Multipoint
Multichannel Distribution Service (MMDS) to customers that are
under-served by the remaining cable TV and Bell companies.
SPRINT MERGER
On October 5, 1999, WorldCom and Sprint announced a definitive
merger agreement creating the pre-eminent global communications company
for the 21
st
century. The combined company will provide a full range of services to
residential and business customers on its owned, end-to-end,
state-of-the-art network infrastructure. WorldCom will be a leader in
the fastest growing areas of global communications services, offering
innovative broadband, "all-distance" services to businesses
and homes, and nationwide digital wireless voice and data services.
The merger is subject to the approvals of WorldCom and Sprint
shareholders, as well as approvals from the Federal Communications
Commission, the Department of Justice, various state government bodies
and foreign antitrust authorities. WorldCom will hold a special meeting
of shareholders on April 28, 2000 to vote on the merger. The companies
anticipate that the merger will close in the second half of 2000.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, this news
release may be deemed to include forward-looking statements that
involve risk and uncertainty, including financial, regulatory
environment and trend projections. Although the Company believes that
its expectations are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. The important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein (the "Cautionary
Statements") include, without limitation, uncertainties associated
with the success of acquisitions and the integration thereof, the
effects of vigorous competition in the markets in which the Company
operates, the impact of technological change on the Company's
business, new entrants and alternative technologies and dependence on
availability of transmission facilities, risks of international
business, regulatory risks including the impact of the
Telecommunications Act of 1996, contingent liabilities, the impact of
competitive services and pricing, risks associated with Euro conversion
efforts, risks associated with debt service requirements and interest
rate fluctuations, the Company's degree of financial leverage as well
as other risks referenced from time to time in the Company's filings
with the Securities and Exchange Commission. All subsequent written and
oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements. The Company does not undertake any obligation to
release publicly any revisions to such forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
WorldCom (NASDAQ: WCOM) is a global leader in
"all-distance" communications services with operations in
more than 65 countries. Revenues in 1999 were $37 billion, with more
than $15 billion from high-growth data, Internet and international
services. WorldCom and Sprint have announced a merger agreement, which
the companies expect to close in the second half of 2000 after
regulatory and shareholder approvals. For more information go to
http://www.wcom.com
WorldCom will conduct a conference call to discuss its financial
results today, Thursday, April 27 at 9:00 AM (Central Time). The call
will be available to all investors on the Internet at
http://www.wcom.com/investor_relations/
