Thursday, February 24, 2005

MCI's Q4 Revenue Declines 2% Sequentially, 10% YoY

MCI reported Q4 2004 revenue of $5.0 billion, a decline of 2 percent sequentially and 10 percent year-over-year. Enterprise Markets revenue increased 1 percent sequentially, Commercial Markets revenue was flat sequentially and Mass Markets revenue was down 9 percent sequentially.

For the full year 2004, revenues totaled $20.7 billion, down 15 percent from 2003 revenues of $24.3 billion. Operating loss was $3.2 billion. Operating income before $1.9 billion of depreciation and amortization, a $1 million gain on property dispositions and $3.5 billion of impairment charges would have been $2.2 billion in 2004. In 2003, operating income was $0.7 billion; operating income before $2.3 billion of depreciation and amortization, and a $43 million loss on property dispositions would have been $3.0 billion.

MCI's Q4 operating expenses totaled $4.5 billion, down 8 percent sequentially (excluding pre-tax impairment charges of $3.5 billion) and down 23 percent year-over-year. Access costs decreased 1 percent sequentially and declined 13 percent year-over-year. Selling, general and administrative costs fell 16 percent sequentially and 36 percent year-over-year. Included in operating expenses for the fourth quarter were $24 million of severance and reorganization costs.

Operating income for the fourth quarter of 2004 was $434 million, compared to an operating loss of $3.4 billion, (or operating income of $121 million excluding pre-tax impairment charges of $3.5 billion) in the third quarter of 2004 and an operating loss of $332 million in the fourth quarter of 2003.

2005 Guidance

Based on the existing regulatory environment and assuming no significant acquisitions or divestitures, MCI expects to generate revenues of $18 billion to $19 billion in 2005, down 10 percent to 14 percent from 2004. The revenue decline primarily reflects a change in Mass Markets revenues as recent regulatory changes impact our ability to serve the consumer market on a profitable basis.

MCI expects to generate operating income before depreciation and amortization (estimated at $1.4 billion to $1.5 billion) of $1.8 billion to $2.0 billion in 2005. MCI's plans indicate that incremental revenue and profits from new services will boost second half revenues and operating profitability over first half levels.

Capital expenditures of approximately $1.0 billion are planned in 2005, as MCI accelerates new product and service offerings in Private IP, security, hosting and network management. MCI will continue to invest in Ultra Long Haul technology, and continue the expansion of its MPLS node structure.


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