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Asset Writedown Hurts MCI

First AT&T Corp. (NYSE: T), then Sprint Corp. (NYSE: FON), and now MCI Inc. (Nasdaq: MCIP): All three have written down the value of their long distance networks in the past weeks.

Today it was MCI's turn, as it announced $3.5 billion in non-cash charges (see MCI Reports $3.4B Loss in Q3, AT&T to Take $11B Charge, and Sprint Posts Q3 $2.7B Loss).

Between them, the three carriers have cut back the value of their long-distance networks by $18.4 billion (AT&T's writedown was $11.4 billion and Sprint's $3.5 billion).

The charges, stated MCI in a press release, "reflect the overall industry environment, including recent regulatory decisions that impact the prospects for MCI's consumer business."

That's right -- it's not MCI's fault (see RBOCs Clear (Another) Regulatory Hurdle and BellSouth Applauds FCC Decision).

The writedown left MCI with a net loss of $3.4 billion, or $10.65 per share, compared with a $55 million net loss a year earlier. Without the charges, MCI says it would have reported an operating income of $121 million, up from $77 million a year earlier, and up from the second quarter's $41 million.

More worryingly, third-quarter revenues, at $5.1 billion, were down by 15 percent from the $6 billion recorded a year earlier, and down 3 percent sequentially from the second quarter's $5.2 billion. However, the revenue numbers met analysts' expectations, according to Reuters.

MCI's share price was up slightly by 5 cents to $17.30 in pre-market trading.

The consumer business that MCI is so worried about is in major decline. Its Mass Market division recorded revenues of $1.3 billion, down a whopping 18 percent compared with a year earlier.

The operator is tackling its declining revenues by cutting costs. Its selling, general, and administrative (SG&A) outlay in the third quarter was $1.2 billion, down 5 percent sequentially and down 24 percent from a year earlier.

MCI had $5.6 billion in cash on September 30 and total debt of $5.9 billion.

— Ray Le Maistre, International News Editor, Light Reading

falsecut 12/5/2012 | 1:07:09 AM
re: Asset Writedown Hurts MCI What really surprises me is that MCI didn't write down the assets as they came out of bankruptsy. That would have been a good time to discount things.

Does this mean that MCI is more in play? I don't see that as their results don't look that good. They've made some money but the retail business is so bad right now that they have to work their way through that first in my view. I'm curious as to what others think.
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