NEW YORK (CNN/Money) - Cash-strapped telecom service provider WorldCom Inc. Tuesday announced plans to eliminate its MCI Group tracking stocks, which it said will yield annual cost savings of $284 million.

Last year, the Clinton, Miss.-based company issued two tracking stocks, one to reflect the performance of its data and Internet services and the other to gauge the performance of its core business and consumer telecom services operations.

But the company has struggled with slack demand for data services in the face of a weak economy as well as pricing pressure and stiff competition in its telecom service business.

Shares of WorldCom Group (WCOM: down $0.07 to $1.42, Research, Estimates), which track its data and Internet services business, have fallen more than 92 percent over the past year.

During the same period, shares of MCI Group (MCIT: down $0.14 to $2.05, Research, Estimates), which contains the company's consumer and small-business units and is the No. 2 long-distance carrier in the U.S. behind AT&T, have fallen 89 percent.

WorldCom, which has had its credit ratings cut to "junk" status by all three major credit rating agencies, said the $284 million in annual cost savings would come from the elimination of the MCI Group's dividend.

"By eliminating our tracking stocks, we will build on our cash position and simplify our corporate structure, benefiting the investment community," John Sidgmore, WorldCom's president and CEO, said in a statement.

"We said from the outset of our new management team that we would take the bold steps necessary to build on our strong balance sheet and strengthen operational efficiencies that will better position the Company for future growth. This is one of those steps," Sidgmore said.

Sidgmore, also vice chairman of WorldCom's board of directors, replaced Bernard Ebbers as CEO last month. Ebbers, one of the company's founders, resigned amid controversy over a $366 million personal loan from the company and a federal probe of its accounting practices.

On July 12, each outstanding share of MCI Group common stock will be converted into 1.3594 shares of WorldCom Group common stock, the company said. It will cease payment of MCI dividends effective on that date as well.

However, holders of record of MCI Group common stock at the close of business on June 30 will be paid the previously declared dividend of 60 cents per share, payable July 15, notwithstanding the July 12 conversion, the company said.

Consistent with the tracking stock terms, Worldcom said MCI Group shareholders will receive a 10 percent premium on their shares based on a 20-day average of WorldCom Group and MCI Group's daily high and low stock price from April 18, 2002 to May 15, 2002.

The tracking stock elimination will not require any action by WorldCom Group or MCI Group shareholders. Beginning July 12, WorldCom will have one class of common stock with the Nasdaq ticker symbol "WCOM."

WorldCom executives have scheduled a conference call for Wednesday morning to further discuss the change.