CLINTON, Miss., November 1, 2000 - WorldCom, Inc. (NASDAQ:
WCOM) today announced a realignment of its businesses with the
distinct customer bases they serve. While WorldCom, Inc. will remain
the name of the Company it will create two separately traded
tracking stocks: WorldCom (NASDAQ: WCOM), which will reflect the
performance of the Company's core high-growth data, Internet,
hosting and international businesses, and MCI (NASDAQ: MCIT), which
will reflect the performance of its high- cash flow consumer, small
business, wholesale long-distance voice and dial-up Internet access
operations.
Under the plan, which has been approved by its Board of
Directors, the Company will make a tax-free distribution to its
shareholders of a 100 percent interest in MCI, which is expected to
be completed during the first half of 2001.
"Realigning WorldCom's structure in this way will enable the
respective businesses to achieve greater management and resource
focus to execute business strategies that work most effectively for
each," said Bernard J. Ebbers, WorldCom president and chief
executive officer. "At the same time, the new structure is designed
to create greater shareholder value by providing shareholders with
two distinct, clear and compelling investment opportunities, while
ensuring a seamless transition for WorldCom customers and
employees."
WorldCom stock will provide investors with a high-growth
investment opportunity that will track the primary growth drivers of
the Company - data, Internet and international services. Together,
these growth businesses represented $4.1 billion of revenue during
the three-month period ended September 30, 2000, providing all of
the Company's $1.1 billion incremental revenues during the period.
MCI stock will track the Company's high-cash flow consumer, small
business and wholesale long-distance voice businesses, as well as
dial-up Internet access services. MCI stock will pay a cash
dividend.
"This plan is a triple-tiered win," said Ebbers. "For our
shareholders, who will gain more targeted investment opportunities.
For our customers, who will experience a more efficient operation
attuned to their individual needs. And for our employees, who will
be enabled to execute targeted business strategies that play to the
strengths of each operation."
WORLDCOM
The WorldCom tracking stock will reflect the performance of the
following businesses:
- Data
- Internet
- Hosting
- International
- Wireless
- Business Long-Distance Voice
- Business Local Voice
WorldCom has the industry's most extensive, state-of-the-art
global facilities-based communications networks, providing unmatched
reach and scale in the marketplace. With its networks, focused sales
efforts and prudent capital investments, WorldCom has annualized
revenues of $23 billion. Of that, data, Internet and international
operations represent a $16 billion annualized high-growth revenue
stream. In addition, WorldCom has high levels of operating cash flow
to fund its aggressive growth initiatives.
The international business consists of revenue streams generated
outside of the U.S., with annualized revenues exceeding $6 billion,
operations in more than 65 countries and local networks in more than
20 cities across Europe, Latin America and Asia-Pacific.
Additionally, business voice represents annualized revenues of $7
billion from a full range of enterprises.
By leveraging its strengths, WorldCom intends to continue to
expand its market leadership in data, Internet and international
services - the growth drivers of the industry today - while
continuing to move quickly to capture significant market share in
global Internet Protocol-Virtual Private Networks (IP-VPNs), hosting
and other growth engines of tomorrow.
Taking advantage of its network and management strengths,
WorldCom will market a full complement of e-business-enabling
communications services for enterprises worldwide. WorldCom plans to
expand its current global Internet and high-speed data networks
further into Europe and Asia-Pacific to provide business customers
in these rapidly growing regions the reliability, performance and
scale they need as their operations and communications needs expand.
From its global leadership position in IP infrastructure,
WorldCom will continue its expansion into next generation "edge"
services, such as IP-VPNs, advanced hosting and content delivery.
The IP-VPN market, which is currently in its initial growth phase,
is expected to grow to more than $7 billion by 2005. This digital
technology simplifies operations by allowing data to reach more
locations through expansion of a data network's reach via the
Internet, without sacrificing the security and reliability of
private networks. Leveraging its industry-leading IP and data
network platforms, network services experience and corporate
enterprise relationships, WorldCom is well positioned to tap into
these significant growth opportunities.
Managed hosting, an area projected in the U.S. alone to reach
more than $19 billion by 2004, is an emerging business that provides
data centers and application operations, allowing customers to
outsource their increasingly essential web-based e-business
operations. WorldCom will expand its presence in the highly
fragmented hosting market with the addition of a controlling
interest in Digex, a leading managed hosting provider, through its
proposed acquisition of Intermedia.
MCI
The MCI tracking stock will reflect the performance of the
following businesses:
- Mass Markets
- Wholesale Services
- Small Business
- Dial-up Internet Service
- Paging
- Prepaid Card
MCI stock will provide investors with dividend income and will
track the Company's high-cash flow consumer, small business,
wholesale voice-based long-distance and dial-up Internet businesses.
With annual revenues of more than $16 billion, MCI will focus on
providing shareholders with an income-oriented investment
opportunity linked to some of the Company's most established
enterprises. The MCI management team will be compensated based on
its ability to generate strong operating cash flow, reduce debt and
return excess cash flow to MCI shareholders.
As one of the largest providers of consumer long-distance
services, MCI will leverage its globally recognized brand, marketing
channels and broad consumer product offerings. MCI has one of the
world's largest and most successful telemarketing operations,
encompassing 18 call centers.
MANAGEMENT STRUCTURE
Bernard J. Ebbers will remain the Company's president and chief
executive officer. Scott Sullivan will remain the Company's chief
financial officer, reporting to Mr. Ebbers. MCI's management
structure, reporting up to Mr. Ebbers, will be named in the coming
weeks.
The WorldCom, Inc. Board of Directors will govern the activities
of both WorldCom and MCI.
TRANSACTION SPECIFICS
Upon shareholder approval of the tracking stocks, WorldCom, Inc.
shareholders will receive one share of MCI stock for every 25 shares
of WorldCom, Inc. common stock held immediately prior to the
tracking stock distribution date.
MCI stock will initially pay a quarterly dividend of
approximately $75 million ($300 million per year). MCI will
initially be allocated notional debt of $6 billion and the remaining
WorldCom, Inc. debt (approximately $17 billion) will be allocated on
a notional basis to the WorldCom tracking stock.
The Company expects to file its registration/proxy statement with
the Securities and Exchange Commission before the end of 2000, to
hold its shareholder meeting to vote on the tracking stock plan in
the first half of 2001 and to effect the distribution of the MCI
stock shortly after shareholder approval. No regulatory approvals
are expected to be required.
NOTE TO MEDIA: WorldCom, Inc. will conduct a media call at 1:15
p.m. EST. For those in the U.S. please call U.S. 1-888-566-5969,
passcode 'WORLDCOM.' International callers may join by dialing
1-712-271-3626, passcode 'WORLDCOM.'
ABOUT WORLDCOM
WorldCom, Inc. (NASDAQ: WCOM) is a preeminent global
communications company for the digital generation, operating in more
than 65 countries. Global revenues in 1999 were $36 billion, with
$15 billion from high-growth data, Internet and international
services. WorldCom provides the innovative technologies and services
that are the foundation for business in the 21st century. For more
information go to http://www.wcom.com
FORWARD-LOOKING STATEMENTS
The foregoing are
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended,
including statements concerning future operating performance, share
of new and existing markets, and revenue and earnings growth rates.
Such forward-looking statements, which are not a guarantee of
performance, are subject to a number of uncertainties and other
factors, that could cause actual results to differ materially from
such statements, including vigorous competition; the ability to
establish a significant market presence in new geographic service
markets, and the success and market acceptance of new products and
services. For a more detailed description of the factors that could
cause such a difference, please see WorldCom, Inc.'s filings with
the Securities and Exchange Commission. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
We urge investors and security holders to read WorldCom, Inc.'s
Registration Statement on Form S-4, including the prospectus and
proxy statement, when they become available, because they will
contain important information. When these and other documents
relating to the transaction are filed with the U.S. Securities and
Exchange Commission, they may be obtained without charge from the
SEC's website at http://www.sec.gov. Holders of WorldCom, Inc. stock
may also obtain each of these documents (when they become available)
for free by directing your request to WorldCom, Inc., c/o Investor
Relations Department, 500 Clinton Center Drive, Clinton, Mississippi
39056. This communication shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of
securities in any state in which the offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such state. No offering of securities shall
be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act.
WorldCom, Inc. and certain other persons referred to below may be
deemed to be participants in the solicitation of proxies of
shareholders to adopt the proposals which will be set forth in the
proxy statement contained in WorldCom, Inc.'s Registration Statement
on Form S-4. The participants in this solicitation may include the
directors and executive officers of WorldCom, Inc., who may have an
interest in the transaction including as a result of holding shares
of common stock and/or options to acquire the same. A detailed list
of the names and interests of WorldCom, Inc.'s directors and
executive officers is contained in the Company's proxy statement for
its 2000 annual meeting, which may be obtained without charge at the
SEC's Internet Website at http://www.sec.gov.
WorldCom and MCI
Frequently Asked Questions
Q.1 What is the purpose of WorldCom's announcement?
WorldCom, Inc. is realigning its world-class assets and brands to
better focus on the customer bases they serve. Today, the Company
serves two distinct groups of customers: corporate enterprises and
wholesale and consumer customers. The Company will maintain a
tracking stock, WorldCom (NASDAQ: WCOM), that reflects the
performance of services delivered to our core corporate enterprise
customers including the high-growth data, Internet, web hosting and
international businesses. The Company will also create another
tracking stock, MCI (NASDAQ: MCIT), that tracks the performance of
our high-cash flow consumer and wholesale long-distance voice
businesses. These steps will allow the Company to better focus our
resources on serving the distinct needs of our corporate enterprise
customers and our wholesale and consumer customers.
Q.2 What is a tracking stock?
Tracking stock is a separate class of a company's common stock
designed to provide a return to investors based upon the financial
performance of a distinct business unit of the company, sometimes
referred to as the targeted business. The ownership of the targeted
business does not change, and while each of the classes of stock
trade separately, all shareholders are common shareholders of the
company.
Q.3 Why is WorldCom doing this?
The realignment of our businesses will enable WorldCom and MCI to
more efficiently execute their business strategies by providing
greater management and resource focus to more adequately address the
unique fundamentals of each unit. Because we will report financial
results for WorldCom and MCI (in addition to the consolidated
WorldCom, Inc. results), it will help investors to understand the
value of each business. This will provide investors a choice between
the high growth of WorldCom and/or the value opportunity and
dividend yield of MCI without having to invest in both at the same
time.
Q.4 Do these actions constitute a change in strategy at WorldCom?
No. These actions provide greater clarity between the two
businesses but does not alter our strategy. Our strategy at WorldCom
is to be a global provider of communications services to corporate
enterprises, while our strategy at MCI is to provide high-quality
voice communication services to consumer and wholesale consumers.
Q.5 What differentiates WorldCom's plan and strategy?
Our actions mark a reaffirmation of our strategy to focus
separately on our high- growth data-driven corporate enterprise
businesses, and our mature consumer- oriented business. We are not
splitting up businesses that were intended to operate together, but
simply realigning assets and brands with their respective customer
bases: WorldCom as the "generation d" corporate enterprise brand,
and MCI as the nationally-recognized consumer brand. Finally, we
expect to complete this transaction very quickly (within the first
half of 2001) without any operational disruptions.
Q.6 Why did WorldCom choose a tracking stock over a spin-off?
We want to maintain the integrity of the company and its ability
to serve customers with the products and services they want. By
issuing a tracking stock, the company will retain the advantages of
doing business as a single company as we do today because each group
will benefit from cost savings and synergies. These advantages
include lowering overall borrowing costs by maintaining the credit
rating of the combined company, retaining tax consolidation
benefits, and allowing the businesses attributed to each group to
capitalize on relationships with businesses attributed to the other
group. These benefits would not be available if the two businesses
were separated in a spin-off transaction.
Q.7 Are there other businesses that WorldCom, Inc. management
would consider for a tracking stock?
With these two tracking stocks, we have put together the
businesses with common assets and customers and we believe this
structure will maximize value for all parties. However, the
Company's management continually evaluates all options that have
potential to create additional value for its shareholders.
Q.8 How will WorldCom and MCI compensate management?
Incentives of executives and other employees will be closely
aligned with the performance of their respective units, through
stock options and/or cash incentives of the tracking stocks of each
group.
Q.9 On what basis was the dividend policy established?
The dividend for MCI was based on our desire to return a
significant portion of the cash generated from operations to
shareholders on a consistent basis. In addition, we believe the
steady cash flows generated will afford us the opportunity to retire
a significant amount of debt on a yearly basis. With respect to
WorldCom, we do not plan to institute a dividend given the
significant growth and investment opportunities associated with
these businesses.
Q.10 How will this affect WorldCom, Inc.'s credit ratings?
We are not increasing the amount of borrowings by the Company on
a consolidated basis. Therefore, we do not expect that this
transaction would have any impact on our credit ratings.
Q.11 Will WorldCom have an inter-group interest in MCI?
No. The Company intends to distribute 100 percent of MCI tracking
stock to shareholders of WorldCom, Inc. as of the effective date. At
the same time, the Company will reclassify WorldCom common stock as
WorldCom tracking stock. After this distribution, WorldCom, Inc.
will continue to own 100 percent of the assets of the WorldCom and
MCI businesses.
Q.12 How does the Company intend to ensure that cash flow from
one group will not be reinvested in the other group? Are there
financial obligations from WorldCom to MCI or vice versa?
The board will adopt a policy that earnings and cash flow
generated from the business of WorldCom or MCI will be used only for
reinvestment in the business of the entity generating such earnings,
for the repayment of debt, for the payment of dividends or the
repurchase of shares of tracking stock related to that group.
However, funds of one entity may be loaned to the other and will
accrue interest at established, market based rates. In addition,
holders of both classes of tracking stock will remain common
shareholders of WorldCom, Inc. and be subject to all of the risks
associated with an investment in WorldCom, Inc. and all of its
businesses, assets and liabilities.
Q.13 How will this change affect all of WorldCom's stakeholders
including customers, employees, equipment vendors and suppliers?
The realignment and creation of tracking stocks will provide
investors with a choice between the high growth of WorldCom, Inc.
and the value opportunity and dividend yield of MCI. We believe that
the choice, enhanced management focus and transparency resulting
from these actions will result in increased value for shareholders.
Q.14 How is this action intended to benefit investors?
The separation will highlight the WorldCom stock that is targeted
toward growth investors: high revenue, EBITDA, and EPS growth as
well as our commitment to maintain high capital spending to continue
the growth of these businesses. MCI stock will highlight high cash
flow and dividend yield providing an investment vehicle for
income-oriented investors.
Q.15 How will the two groups cooperate in this new structure?
No significant changes will occur as a result of these actions.
The primary inter- group relationship will be the selling of
wholesale voice minutes by MCI to WorldCom and the provisioning of
various general and corporate services. The wholesale marketing of
minutes is a mature, transparent market. Prices will be set at then
prevailing market rates. MCI will purchase transport, either through
long- term leases or purchases, from WorldCom, Inc., which will
control the communications network.
Q.16 How do these actions help the Company address the
increasingly competitive landscape for wholesale and consumer voice
communication services?
The wholesale and consumer voice businesses are mature,
profitable businesses where revenue growth is difficult to achieve.
These actions will provide management of MCI incentives to position
these mature businesses more competitively in the long-term.
Q.17 Does this action reflect a diminished commitment to, or lack
of confidence in, the consumer long distance market by WorldCom,
Inc.?
No. The consumer long distance business is important to WorldCom,
Inc. and is a key element of the MCI tracking stock. In fact, this
announcement reinforces our commitment to the consumer long distance
market by realigning our assets to better serve our customers in
this market.
Q.18 Will the tracking stock structures alter capital budget
allocations to WorldCom and MCI in the future?
WorldCom, Inc. will allocate capital appropriately to ensure that
WorldCom has sufficient resources to fund its growth and MCI has
sufficient resources to sustain its cash flow.
Q.19 How does this new stock structure affect another company's
ability to acquire WorldCom, Inc., WorldCom or MCI? Would you
consider selling either entity if approached?
This structure is not intended to make it any easier or harder
for another company to acquire WorldCom, Inc. However, there are
certain limitations on the ability of another company to control a
tracked group without acquiring both tracking stocks. We are
currently not considering further actions but will continue to
evaluate all options that can potentially create shareholder value.
Q.20 How will these actions affect the Intermedia merger
agreement?
The Intermedia transaction is expected to close prior to the
shareholder vote to approve the tracking stocks. Upon closing of the
Intermedia transaction, the Intermedia shareholders will become
shareholders of WorldCom, Inc. Intermedia shareholders will receive
the same combination of tracking stocks as current shareholders of
WorldCom, Inc. Neither the Intermedia nor the Digex Board of
Directors will need to reconsider its approval of the Intermedia
merger with WorldCom, Inc. in light of this action.
Q.21 What voting rights will WorldCom and MCI shareholders have
after the stock distribution?
Voting rights of WorldCom and MCI shareholders will be prorated
based on the relative market values of WorldCom and MCI, with no
predetermined maximum limit on the percent of vote either group may
represent.
Q.22 Will the Company conduct separate annual meetings for
WorldCom and MCI shareholders?
No. The Company will conduct shareholder meetings that encompass
all holders of WorldCom, Inc. common stock. WorldCom and MCI
shareholders will vote together as a single class on all matters
brought to a vote of shareholders, including the election of
directors.
Q.23 How will WorldCom, Inc. report earnings for the consolidated
company and each of the tracking stocks?
Because the Company is unchanged as a legal entity it will
continue to issue consolidated financial statements which
consolidate WorldCom and MCI. In addition, the Company separately
will report the financial results of WorldCom and the results of
MCI.
Q.24 Will MCI have a separate board of directors?
No. MCI is not a separate corporation and the legal structure of
WorldCom, Inc. is not changing. The WorldCom, Inc. Board of
Directors will manage the activities of both WorldCom and MCI.
Management of WorldCom and MCI will report to WorldCom, Inc.'s
president and chief executive officer.
Q.25 How will a single board of directors resolve issues in which
the interests of the holders of WorldCom and MCI may conflict?
The board will have the same fiduciary duties to holders of
WorldCom and MCI stock that it currently has to holders of the
existing WorldCom, Inc. common stock. That duty is to act in its
good faith business judgment of the best interests of the company as
a whole.
Q.26 Does WorldCom have the ability to convert one class of
common stock into the other class of common stock?
Yes. The board may convert each outstanding share of MCI tracking
stock into shares of WorldCom tracking stock at a premium of 110
percent of the relative trading value of MCI for the 20 days prior
to the announcement of such conversion. No premium will be paid on a
conversion which occurs after three years of issuance of the MCI
stock.
Q.27 What would the shareholders of WorldCom or MCI stock receive
if all or substantially all of their respective assets were sold?
The shareholders would receive either: (1) a distribution equal
to the fair value of the net proceeds of the sale, either by special
dividend or by redemption of shares, or (2) a number of shares of
the remaining entity's common stock having been calculated in
accordance with a predetermined conversion premium.
The foregoing are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of
1934, as amended, including statements concerning future operating
performance, share of new and existing markets, and revenue and
earnings growth rates. Such forward-looking statements, which are
not a guarantee of performance, are subject to a number of
uncertainties and other factors, that could cause actual results to
differ materially from such statements, including vigorous
competition; the ability to establish a significant market presence
in new geographic service markets, and the success and market
acceptance of new products and services. For a more detailed
description of the factors that could cause such a difference,
please see WorldCom, Inc.'s filings with the Securities and Exchange
Commission. The Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
We urge investors and security holders to read WorldCom Inc.'s
Registration Statement on Form S-4, including the prospectus and
proxy statement, when they become available, because they will
contain important information. When these and other documents
relating to the transaction are filed with the U.S. Securities and
Exchange Commission, they may be obtained without charge from the
SEC's website at http://www.sec.gov. Holders of WorldCom, Inc. stock
may also obtain each of these documents (when they become available)
for free by directing your request to WorldCom, Inc., c/o Investor
Relations Department, 500 Clinton Center Drive, Clinton, Mississippi
39056. This communication shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of
securities in any state in which the offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such state. No offering of securities shall
be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act.
WorldCom, Inc. and certain other persons referred to below may be
deemed to be participants in the solicitation of proxies of
shareholders to adopt the proposals which will be set forth in the
proxy statement contained in WorldCom Inc.'s Registration Statement
on Form S-4. The participants in this solicitation may include the
directors and executive officers of WorldCom, Inc., who may have an
interest in the transaction including as a result of holding shares
of common stock and/or options to acquire the same. A detailed list
of the names and interests of WorldCom Inc.'s directors and
executive officers is contained in the Company's proxy statement for
its 2000 annual meeting, which may be obtained without charge at the
SEC's Internet Website at http://www.sec.gov.
# # #
For more information about WorldCom's digital initiatives, go
to http://www.wcom.com/digitalgeneration/