Profits rise 17% for MCI Largest phone-traffic increase in five years spurs 4th-quarter gain

January 31, 1996|By BLOOMBERG BUSINESS NEWS

WASHINGTON -- MCI Communications Corp.'s fourth-quarter profit rose 17 percent as a record number of long-distance customers spawned the largest increase in phone traffic in five years.

Net income rose to $284 million, or 41 cents a share, from profit from operations of $243 million, or 35 cents, a year ago. Results were a penny above the average estimate of 40 cents a share from 18 analysts surveyed by Zacks Investment Research.

Revenue at the No. 2 U.S. long-distance company rose 22 percent to $4.14 billion, from $3.40 billion.

MCI separated its long-distance results from new ventures, such as wireless, for the first time to force Wall Street to put a higher value on the company. The strategy worked, analysts said.

"The earnings power in the long-distance business is greater than the market expected," said William Deatherage, an analyst at Bear Stearns & Co. "The [new] projects are meeting or beating expectations."

The shares closed unchanged at 29.25 after rising 1.75 yesterday.

The increase in long distance beat estimates and exceeded the results of rival AT&T Corp., the No. 1 long-distance company.

Growth in minutes of use, or volume, on MCI's network rose to 22 percent, surpassing estimates of 19 percent to 20 percent. AT&T posted an increase of 8 percent.

MCI also had strong sales from its new businesses, such as wireless. At the end of the year, it had more than 800,000 paging and cellular customers. In 1994, it was not in either business.

"MCI is really clicking on all cylinders," said Douglas Maine, the company's chief financial officer.

By increasing its long-distance business at a faster clip than AT&T, MCI is boosting its 20 percent share of the $70 billion-a-year long-distance phone market, analysts said.

That increase, coupled with an industrywide reduction in the amount of money MCI has to pay the local phone companies to complete its phone calls, helped MCI increase earnings.

"It was a great quarter," said Guy Woodlief, an analyst at Dean Witter Reynolds. "We had been out on a limb on volume growth and they beat even our expectations."

MCI said its long-distance business earned $344 million in the fourth quarter, a 37 percent increase from $252 million a year ago, excluding charges. Revenue in its long-distance business rose 15 percent, to $3.91 billion, from $3.39 billion.

MCI posted a 20 percent increase in revenue from enhanced services such as calling card, personal 800 numbers and collect calling services. Revenue from data services rose 34 percent in 1995 to $1.5 billion.

One-third of MCI's new customers signed up for new services introduced last year, MCI said.

"No one has been more aggressive or more effective in providing customers with total communications solutions than MCI," said Gerald Taylor, president and chief operating officer.

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