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Government Bans MCI

Light Reading
LR Mobile News Analysis
Light Reading
7/31/2003

The writing appears to be graven into the wall for MCI (Nasdaq: MCIT).

This afternoon, the General Services Administration (GSA), the procurement arm of the U.S. government, barred the company from any further business with the government, stating that MCI lacks the "necessary internal controls and business ethics" to receive further government contracts (see Feds Ban MCI From Gov't Contracts).

The federal government is one of MCI's largest customers. The loss of federal contracts, said to be worth $800 million a year, is likely to crush the company, analysts say, as it struggles to emerge from bankruptcy amid allegations by its competitors that it defrauded them out of millions of dollars in access charges.

The proposed debarment triggers an immediate suspension of the company's eligibility to compete for new Federal government contracts.

MCI's most recent government mobile contract -- and apparently its last -- is its $45 million deal to supply a GSM network of 5,000 cellular lines in Baghdad to U.S. officials, American troops, and aid workers stationed in the region. This contract was awarded in May of this year (see MCI's Iraq Offensive).

Get the gory details on Unstrung's sister site: Boardwatch.

— Jo Maitland, Senior Editor, Boardwatch

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