Mci Profit Unchanged From Year Ago

Losses Offset Increase In Long-distance Earnings

April 25, 1997|By BLOOMBERG NEWS

WASHINGTON -- MCI Communications Corp.'s first-quarter profit was unchanged from a year earlier, the company said yesterday, as wider losses in new local phone and international operations offset an increase in long-distance earnings.

The nation's No. 2 long-distance company behind AT&T Corp. said it earned $295 million, or 42 cents a share, the same as a year earlier. The earnings were a penny short of the average estimate of 43 cents a share, based on a survey of 15 analysts by IBES International Inc. MCI shares fell $1.375, to end at $37.375, in Nasdaq trading yesterday.

Results show that Washington-based MCI's strategy to focus on more profitable business and data services, which is different from the strategy of rivals AT&T and Sprint Corp., is paying off.

That will bode well for MCI as it draws closer to completion of its sale to British Telecommunications PLC, analysts said. The combined company is expected to spend more to expand into new markets.

"MCI is making a real push toward the business market, almost at the expense of the consumer market," said Barry Sine, an analyst at SBC Warburg Inc.

MCI said growth in the amount of long-distance traffic handled on its phone network -- 4 percent -- is its lowest growth rate in at least seven years and the first time in recent memory that volume at MCI grew at a slower clip than at AT&T.

"That [volume growth] does worry me," said Sine. "You need to have a certain customer base if you are going to sell the new services."

Analysts, however, were encouraged by the company's strategy of focusing on more profitable services, such as data and the Internet, which helped boost operating profit in the long-distance business by 6.4 percent.

While MCI's first-quarter profit was unchanged, earnings at AT&T fell 24 percent, and profit at Sprint, the No. 3 U.S. long-distance carrier, fell 6.1 percent. Both AT&T and Sprint are targeting less profitable phone services for consumers.

MCI's growth in first-quarter sales outpaced its rivals as well, with revenue up 8.7 percent to $4.9 billion.

Sprint's first-quarter revenue rose 7.3 percent, while AT&T had a 1.5 percent increase in sales.

Pub Date: 4/25/97

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